Yemeni citizens are increasingly using decentralized finance (DeFi) protocols to bank themselves amid US sanctions aimed at the Houthi group, which they have deemed a terrorist organization.
In the past, internet infrastructure challenges and low financial literacy among the war-torn population contributed to relatively limited crypto adoption, according to an April 17 report from blockchain intelligence firm TRM Labs.
“However, there are signs of growing interest and usage driven primarily by necessity rather than speculation,” the blockchain intelligence firm said.
“For those who use cryptocurrencies in Yemen, the ability to bypass the disruption in local financial services offers a modicum of financial resilience, especially as banks can be difficult to access or are simply inoperable due to the ongoing conflict.”
Yemen has been in a civil war between the government and the Houthi group since September 2014. The US has also frequently sanctioned financial infrastructure in the country to disrupt Houthi activity, with the most recent action on April 17 hitting the International Bank of Yemen.
DeFi platforms account for most of Yemen’s crypto-related web traffic, taking up over 63% of observed activity, while global centralized exchanges account for 18% of crypto-related web traffic, TRM Labs data shows.
Some local Yemenis also use peer-to-peer crypto transactions to move funds across borders or conduct remittances.
“Although these interactions do not necessarily imply high transaction volumes, they reinforce that for some individuals in Yemen, decentralized infrastructure may provide a necessary alternative to traditional payment rails,” TRM Labs said.
“The interest in DeFi services may reflect the appeal of systems that allow users to transact without intermediaries, particularly where local banking institutions are inaccessible or unreliable.”
Increasing sanctions could spark higher crypto adoption in Yemen
Currently, Yemen doesn’t have legislation in place for the use of crypto; TRM Labs speculates that increasing sanctions against the Houthis could be the spark that ignites higher crypto adoption in Yemen.
Following the Biden administration’s relisting of the Houthis as a Specially Designated Global Terrorist in January 2024, a Yemen-based cryptocurrency exchange tracked by TRM experienced a 270% increase in overall volume, the blockchain intelligence firm said.
It eventually returned to pre-spike levels, but it saw another uptick again, this time by 223%, in the three months following the election of US President Donald Trump and the reinstating of the Houthis as a foreign terrorist organization by the US on Jan. 22.
“Given the intensifying international sanctions on the Houthis and their primary backer, Iran, the group’s use of cryptocurrency is likely to grow in both scale and sophistication,” TRM Labs said.
“As traditional financial avenues become increasingly restricted, decentralized digital currencies offer an alternative that is less susceptible to oversight and harder to trace.”