Eastern Europe may have only the fourth largest cryptocurrency market by volume of transactions, but two countries in the region claim the world’s lead in cryptocurrency adoption. Ukraine and Russia occupy first and second place in the adoption of cryptocurrencies, such as Bitcoin, internationally.
According to a survey by Chainalysis, Ukraine ranked first in the global cryptocurrency adoption index between July 2019 and June 2020. The Chainalysis index looks at the value of cryptocurrencies received, exchanged and deposited.
In total for the period considered, Ukraine sent $8.2 billion worth of cryptocurrencies and received cryptocurrencies worth $8 billion.
Russia, for its part, ranked second by population, sending $16.8 billion worth of cryptocurrencies and receiving $16.6 billion worth of coins at the same period.
As analysts explain, while these figures are much lower than those of China, the US and other leading markets, they show a much higher level of adoption when taking into account the population of countries and the size of their economies.
Overall, according to the study, which analysed activity in more than a dozen different cryptocurrencies, Eastern Europe accounted for 12% of global cryptocurrency activity during July 2019 and June 2020.
However, while the vast majority of this activity is legal, Eastern Europe is also the world’s first to illegally use cryptocurrencies in “dark internet” markets and ransomware programs.
Lack of trust
Chainalysis analysts are trying to interpret the high adoption rates of cryptocurrencies in Russia and Ukraine. As they explain, one of the reasons is the lack of public confidence in the official government, in the banking system, in business and also in the media.
“Bribery and other forms of corruption are common in both countries. It is a common secret that money can be seized from businesses and private citizens, who will find themselves in disfavor against government officials. Banks also face a particular lack of confidence,” analysts say.
They cite a recent study by the Herald of the Russian Academy of Sciences, which finds that 56% of Russians do not trust banks, with much of the negative feeling coming from the financial crisis of the 1990s.
Ukraine has also seen its citizens’ confidence in banks decline after the collapse of many major financial institutions in the country over the past decade.
“Distrust of the government’s banks and economic policy inspired many of Bitcoin’s original supporters and we believe it could also fuel excessive adoption of cryptocurrencies in Russia, Ukraine and other parts of Eastern Europe,” the same analysis notes.
In addition, consumers in both countries are familiar with electronic payments and electronic money, which has made the adoption of cryptocurrencies easier.
“The banking industry in the Eastern Bloc did not develop in the same way it did in the West. In particular, the process of transferring money between accounts and abroad was particularly problematic. As a result, many domestic informal methods for transferring money were created. Even before the use of cryptocurrencies, there were other financial instruments, such as coupons,” the analysts add.