Chainalysis: Russia has become the leader in cryptocurrency inflows in Eastern Europe

What’s new? According to a report by blockchain analytics company Chainalysis, cryptocurrency adoption continues to grow in Eastern Europe despite war and a lack of a clear regulatory framework. Moreover, the region is the fourth-largest global cryptocurrency market: from July 2023 to June 2024, the value of on-chain transactions conducted here amounted to $499,14 billion, or 11% of the global volume.

Chainalysis report

What else is known? The majority of cryptocurrencies in the reporting period were sent by local users to centralized exchanges (CEXs), with a value of $324 billion. Activity in the decentralized finance (DeFi) sector also grew significantly over the year to $165,46 billion or a third of cryptocurrency inflows into the region.

In the global crypto adoption index 2024, regional leaders Ukraine and Russia ranked sixth and seventh, respectively, with Russia moving up six positions compared to last year’s ranking.

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In addition, Russia became the leader in cryptocurrency inflows in Eastern Europe with $182,44 billion, while Ukraine placed second ($106,1 billion).

“That both countries’ crypto markets are thriving is remarkable given the ongoing war and intensifying international sanctions regime against Russia,” Chainalysis noted.

In Ukraine, much of the crypto market’s growth has been driven by institutional and professional transfers, which is also notable given the changing regulatory situation in the country, analysts write.

The WhiteBit crypto exchange, founded in Ukraine and currently based in Lithuania, attributed this to investors’ desire to seek financial stability amid the ongoing war, where cryptocurrencies are seen as a safer alternative.

According to the order book analysis, the volume of BTC purchases using the Ukrainian hryvnia has grown over the past year to $882,64 million. The growth started after the 26,6% inflation peak set in December 2022. In many countries with high rates of national currency depreciation, there is a tendency to increase the use of bitcoin as a safe haven asset.

As for Russia, it continues to receive cryptocurrency from both domestic and foreign sources, with the upward trend of local services continuing from the last reporting period. By now, Russian services account for more than 50% of the traffic.

In Russia, the number of visits to global CEX platforms remains virtually unchanged, while the indicator for local exchanges that do not require identification procedures (KYC) peaked in mid-2023 and has remained at the same level since then. This can be attributed to sanctions that have restricted local traders from using both bank cards and cryptocurrency services.

DeFi activity in Eastern Europe grew nearly 40% year-on-year, making the region the third-fastest growing region globally, behind Latin America and Sub-Saharan Africa.

Decentralized exchanges (DEXs) in Eastern Europe showed the largest growth in cryptocurrency inflows, especially in Ukraine, Russia, Poland, and Belarus. In the region as a whole, $148,68 billion worth of cryptocurrencies flowed into DEXs.

The leaders were again Russia with a 174% increase and a figure of $58,4 billion, as well as Ukraine with an increase of 160,2% and receipts of $34,9 billion. Moldova, Hungary, and the Czech Republic also saw an increase in the use of DeFi lending protocols, with total inflows in these countries totaling $11,29 billion. In addition, Hungary saw a 600% increase in the volume of transactions using cross-chain protocols (bridges).

In Ukraine, the number of large institutional transactions (transactions over $10 million) increased by 361,49%, which largely accounted for DeFi’s growth. In Russia, Belarus, Poland, and Slovakia, DeFi growth was also driven to the greatest extent by large institutional transactions.

Notably, unlike the rest of the world, there is a downward trend in the volume of transactions with USD-pegged stablecoins across the region, including the largest representatives of the segment — USDT from Tether and USDC from Circle.