The economic instability caused by financial sanctions and conflict in Yemen has led to a surge in interest in decentralized finance (DeFi) among ordinary citizens, a recent report by TRM Labs reveals. The report, published on April 17, highlights how U.S. sanctions targeting the Houthi group have prompted Yemenis to explore crypto as an alternative to traditional banking systems.
Yemen, a country with historically low crypto adoption rates due to poor internet infrastructure and limited financial literacy, has seen a growing number of residents turning to cryptocurrencies for financial access in light of the ongoing conflict. With many banks inoperable or inaccessible due to the war, cryptocurrencies have become a lifeline for some Yemenis.
The civil war in Yemen, which has been ongoing since 2014, has exacerbated the situation, prompting the U.S. to impose sanctions on the Houthi group, further restricting access to financial services for the general population. TRM Labs’ data shows that decentralized finance platforms account for over 63% of crypto activity in Yemen, while global centralized exchanges make up just 18%. Peer-to-peer transactions are also on the rise, especially for cross-border transfers and remittances.
The appeal of DeFi lies in its ability to facilitate transactions without intermediaries, a feature that is particularly valuable in areas where local banks are non-functional or distrusted. Despite the lack of formal regulation on cryptocurrency use in Yemen, the report suggests that escalating sanctions could accelerate crypto adoption in the country.
Recent events, such as the U.S. government’s reclassification of the Houthis as a terrorist group and the subsequent spike in crypto volume on a Yemen-based exchange monitored by TRM Labs, indicate a growing reliance on decentralized digital currencies as traditional financial avenues become increasingly restricted. As geopolitical tensions persist, TRM Labs expects both the scale and sophistication of crypto use in Yemen to increase.
In response to the escalating situation, the U.S. Department of the Treasury imposed fresh sanctions targeting the financial networks supporting the Houthi movement, with a specific focus on digital currency channels. This coordinated effort, which included the blacklisting of eight cryptocurrency addresses allegedly controlled by the Houthis, underscores the growing importance of DeFi as a means of financial access in Yemen amidst rising sanctions.
Overall, the report highlights the resilience and adaptability of Yemenis in the face of economic challenges, and the increasing role that decentralized finance is playing in providing financial stability in a conflict-ridden environment.