The United Kingdom received a whopping $233 billion in raw transaction value of cryptocurrency from July 2021 to June 2022, according to an official report released this morning.
It was the highest crypto transaction value of any European nation.
The country has also leapt up the crypto adoption index, moving from 21st last year to 17th place in today’s Chainalysis report.
The highly-anticipated annual document ranks the UK as having the sixth-largest crypto transaction value in the world.
Chainalysis reveals much of the activity was DeFi related, with nearly 20 per cent of the web traffic to both NFT and lending contract-related websites in Europe coming from the UK.
The UK’s crypto market was also the only top-five Western European country that grew from July 2021 to July 2022 in terms of the raw number of on-chain transactions in each quarter.
This suggests that crypto adoption rates were more resilient in the United Kingdom than elsewhere in Europe – a notion supported by Dion Seymour, Crypto and Digital Assets Technical Director at Andersen LLP and former Policy Advisor at HMRC, the UK’s tax authority.
“I would like to think it’s because we’ve tried to provide certainty as far as crypto regulation and taxation go in the UK,” he said.
“No one wants crypto to be taxed, but if there’s uncertainty about how it will be taxed, that can cause some level of consternation too.”
Seymour also believed an important factor was the UK continuing to tackle insufficient consumer protections.
“Consumer protection absolutely needs to be considered if we want DeFi to become mainstream,” he added.
“We will continue to see a lot of conversation among policymakers, the World Bank, World Economic Forum, OECD, HMT, FCA, and obviously HMRC this year.”
Central, Northern, and Western Europe (CNWE) topped the Chainalysis Global Crypto Adoption Index again this year as the world’s largest crypto economy. Users and institutions throughout the region received $1.3 trillion worth of cryptocurrency from July 2021 to June 2022, and Western Europe alone contained six of the 40 highest grassroots adopters of cryptocurrency: The United Kingdom (17), Germany (21), France (32), Spain (34), Portugal (38), and the Netherlands (39).
DeFi protocols and NFTs continued to drive the bulk of this activity, with EU regulations like the crypto travel rule and MiCA licensing regime providing enhanced regulatory clarity.
In most of the ten largest crypto markets in CNWE, on-chain activity grew at a rate of 1-30% over the preceding year. But two outliers stood out: Germany, whose activity grew by 47%, and the Netherlands, whose activity shrank by 3%.
Germany’s outsized growth was likely a by-product of two recent decisions: (1) to enforce a 0% long-term capital gains tax, and (2) to allow many different types of asset managers to invest in cryptocurrencies. Chainalysis data suggests that these actions had the effect of encouraging both retail and institutional adoption. Dutch regulators, by contrast, took a more cautious tone.
In smaller CNWE countries, changes in on-chain activity varied to a much greater extent. At the poles are Estonia, whose activity leapt by 76%, and Malta, whose activity halved over the time period studied.
Malta faced increased competition from July 2021 to June 2022 as countries like the Bahamas and Bermuda and jurisdictions like Abu Dhabi and Dubai ramped up their efforts to attract crypto start-ups to their region. However, the “blockchain island” still has one of the most comprehensive regulatory frameworks worldwide. Estonia, meanwhile, saw quick success in its ambition to become a central European crypto hub, and in May 2022 turned its attention to reducing money laundering, ransomware, and market contagion risks.
NFTs drive DeFi activity throughout CNWE citizens
DeFi is popular elsewhere in CNWE as well, and NFT platforms lead the way, driving the most web traffic of any other DeFi protocol type in the region. This is especially true in Ireland and Norway, where traffic to NFT marketplaces accounts for more than 70% of all DeFi-related web traffic.
Blockchain gaming was the second-most highly visited DeFi category in CNWE, with France, Italy and Spain leading the pack. In these three countries, more than 30% of web traffic was metaverse related.
The cutting edge
In addition to being the world’s biggest cryptocurrency market, CNWE has always been on the cutting edge of the cryptocurrency world — the region’s embrace of DeFi being a great example. As new crypto technologies and use cases emerge, it remains to be seen if CNWE retains its status as an early adopter.