Cryptocurrency Adoption in War-Torn Yemen
One might assume that nations currently suffering from humanitarian crises or enduring the devastation of war would be exempt from adopting cryptocurrency usage. However, the reality is quite the opposite.
For instance, despite the ongoing conflict and economic collapse, cryptocurrency adoption in Yemen is growing as people turn to digital currencies as a means of survival, circumventing the limitations of traditional financial systems.
In this post, we explore the economic situation in Yemen, the state of cryptocurrency adoption, the factors driving its rise, and the potential benefits and challenges of cryptocurrencies in this war-torn nation.
Current Economic Situation in Yemen
Source: Freepik
Yemen’s economy has been shattered by more than a decade of conflict. The civil war, which started in 2014, has left the country in a state of near-collapse, with devastating consequences for its population.
The war, initially sparked by tensions between the Yemeni government and Houthi rebels, escalated when Saudi Arabia intervened in 2015. Since then, Yemen has faced severe restrictions on its economy, particularly with blockades on air, land, and sea that have hampered the importation of essential goods.
According to The United Nations report, approximately 16 million people in Yemen are facing critical food shortages, and of these, 400,000 children are under the age of five and are at risk of dying from hunger.
It is so terrible because basic needs such as food, water, and medical supplies have become increasingly difficult to obtain, as inflation drives up prices and the country’s infrastructure collapses. Sadly, the Yemeni rial has lost much of its value, and the banking sector is unable to provide adequate financial services due to instability.
Unfortunately, this dire economic situation has caused many Yemenis to turn to alternative means of income and survival, including cryptocurrencies. With the banking system in disarray, the local currency in freefall, and international remittance services often blocked or unavailable.
Many individuals have found that digital currencies give a more reliable option for both getting aid and making transactions.
According to the United Nations Economic Commission for the Middle East and North Africa:
"Yemen's financial system is unable to function properly due to the ongoing conflict, and the lack of basic financial services has forced many to explore digital currencies as an alternative.
The lack of infrastructure to facilitate traditional banking, combined with the difficulties in accessing international financial aid, has further exacerbated the situation.
Given the aforementioned, cryptocurrency adoption in Yemen is emerging as a popular option, particularly for individuals seeking efficient ways to receive humanitarian aid, send or receive donations, and facilitate cross-border transactions.
Current State of Crypto Adoption in Yemen
Source: Freepik
It is important to mention that the ongoing crisis in Yemen has made it challenging to assess the current users' crypto adoption rates, unlike in other Asian nations.
Nevertheless, cryptocurrency adoption in Yemen is slowly gaining traction. The use of digital currencies is still limited but growing in popularity among the population, particularly in urban centers like Sana’a, the capital city.
One of the key examples of crypto adoption in Yemen comes from a Reddit user known as “Yemenvoice,” who began using cryptocurrencies to purchase food packages for families in need.
For him, this initiative started out of pure necessity. Traditional donation platforms couldn’t help Yemen because of the ongoing blockade and sanctions. So, Yemenvoice turned to cryptocurrency donations, raising thousands of dollars to buy food and medical aid for those struggling with hunger and the effects of the ongoing conflict.
This shows how cryptocurrency can break through financial barriers in places like Yemen, where banking is scarce, and international aid is often blocked.
According to Cointelegraph, Yemenvoice’s project uses cryptocurrencies like Bitcoin, Ether, and Nano to raise donations for food packages. These funds are transferred to crypto wallets, and then used to buy goods from local merchants or exchanges, bypassing the country's financial blockade.
"We tried by all means to create donation campaigns on donation platforms, and they apologized. They said they don't support Yemen, but now with Bitcoin, we receive donations directly without waiting and help people.”
This growing interest in cryptocurrency use is not limited to humanitarian aid. Yemenis abroad are also using digital currencies to send remittances back home, an increasingly common practice as traditional remittance channels face growing fees and restrictions.
As Yemenis continue to face financial barriers, cryptocurrency provides a way to circumvent both high transaction costs and limitations imposed by traditional financial institutions.
However, despite its potential, cryptocurrency adoption in Yemen remains hindered by several factors, including a lack of infrastructure, limited access to digital wallets, and a general lack of understanding of how cryptocurrencies work. The country’s ongoing conflict, combined with an inadequate technological infrastructure, limits the broader adoption of cryptocurrency.
Crypto Law in Yemen
Source:Freepik
Right now, Yemen’s legal and regulatory landscape for cryptocurrencies is virtually non-existent. The country’s financial and legal systems have been severely disrupted by years of conflict, leaving little space for the creation of formal cryptocurrency laws.
The lack of a regulatory framework means that there is little oversight or protection for users of digital currencies.
In 2019, the Houthi militia, in Yemen, launched its own cryptocurrency called the e-Rial. This digital currency was designed to function as an alternative to the Yemeni rial, which had lost much of its value due to inflation.
The e-Rial was initially intended for domestic transactions and to counter the ongoing economic collapse, but it has faced significant challenges in terms of adoption. The Houthi-controlled areas of Yemen face limited access to the global internet, a major barrier for cryptocurrency transactions that require internet access.
Another interesting turn of events occurred in April 2019, when the Houthis attempted to implement a payment system through the Houthi-controlled Yemen Petroleum Company and other state-run institutions, including the Yemeni Telecommunications Corporation.
However, the initiative faced resistance as employees protested and refused to accept their salaries in e-Ria. This indicates that despite the creation of the e-Rial, Yemen still lacks formal national regulations for cryptocurrencies.
Without a central authority to oversee digital currency use, individuals are exposed to risks such as fraud, scams, and security issues. As a result, this uncertainty has caused many people to fear or hesitate in adopting cryptocurrency.
Factors Driving Crypto Adoption in Yemen
Source: Freepik
Several factors are driving the adoption of cryptocurrencies in Yemen, despite the many challenges faced by the country. These include:
Economic Instability and Inflation
Yemen's economic crisis, marked by rapid devaluation of the Yemeni rial and soaring inflation, has made traditional currencies unreliable for saving or transferring money. Cryptocurrencies offer a valuable alternative that can preserve value beyond the reach of government institutions.
Humanitarian Aid and Remittances
With the collapse of Yemen’s banking sector, many rely on remittances from family members abroad. Cryptocurrencies provide a faster, cheaper way to send money internationally, bypassing costly remittance services and overcoming restrictions that limit access to traditional financial channels.
Decentralization and Financial Freedom
In regions controlled by different factions, many Yemenis are turning to cryptocurrencies because they offer financial freedom not controlled by governments or militias. The decentralized nature of cryptocurrencies allows users to transact without depending on unstable banks or institutions.
Accessibility
Cryptocurrencies also allow individuals to bypass the limited financial infrastructure in Yemen. In areas like Sana’a, where internet access is somewhat available, digital currencies present an opportunity to participate in the global economy, even when traditional banking services are out of reach.
Read: Exploring Factors Influencing the Adoption of Cryptocurrency
Benefits of Crypto Adoption
Source: Pixabay
Cryptocurrency adoption in Yemen provides many benefits, such as:
Increased Financial Inclusion
Cryptocurrency adoption can provide an alternative to Yemen’s collapsed banking system, offering a more accessible means of financial participation for the unbanked population.
With digital currencies, Yemenis can access financial services directly from their phones or computers, without needing to rely on traditional financial institutions.
Ease of Cross-border Transactions
Cryptocurrency allows for fast, low-cost transactions across borders, which is crucial for Yemenis who rely on remittances from abroad.
With limited access to formal financial services, digital currencies can offer Yemen’s citizens abroad a cost-effective alternative to traditional money transfer systems, reducing the cost and time required to send money home.
Circumventing Blockades and Sanctions
As Yemen remains under a blockade, both financially and physically, cryptocurrencies provide an alternative way to bypass these restrictions and gain access to essential goods and services.
The decentralized nature of digital currencies allows individuals to send and receive money without the need for intermediaries that might be blocked by authorities.
Read: How to Get Started with Crypto and Remittances
Challenges Facing Crypto Adoption in Yemen
Source: Freepik
Lack of Infrastructure
Yemen’s lack of technological infrastructure poses a significant challenge to cryptocurrency adoption. Many Yemenis do not have access to smartphones or reliable internet connections, making it difficult for them to engage with cryptocurrencies. Power outages are also a common problem, further limiting access to digital currencies.
Security Concerns
With the ongoing conflict and a lack of legal protection, security remains a major concern for cryptocurrency users in Yemen. The absence of a clear regulatory framework increases the risk of scams, fraud, and theft. Additionally, users face threats of violence or surveillance due to their use of cryptocurrencies in an unstable political environment.
Legal and Regulatory Uncertainty
The lack of legal frameworks and regulations regarding cryptocurrency use leaves users in Yemen vulnerable to potential legal risks. Without clear guidelines, cryptocurrency users operate in a legal gray area, and there is no recourse for individuals in cases of fraud or disputes.
The Potential for Cryptocurrency in Yemen
Source: Pixaby
In a country where the banking system has all but collapsed and traditional financial services are inaccessible, cryptocurrencies provide an opportunity for Yemenis to access financial freedom and participate in the global economy.
The success of initiatives like Yemenvoice’s food distribution program shows the practical benefits of cryptocurrency in delivering aid and facilitating financial transactions. However, the widespread adoption of cryptocurrency in Yemen will depend on overcoming challenges related to infrastructure, security, and legal uncertainties.
As more Yemenis become aware of the potential of cryptocurrencies, the technology could play an increasingly important role in the country’s recovery and resilience.
The future of cryptocurrency in Yemen will depend largely on the broader international response to the conflict, as well as the development of infrastructure and regulations that can facilitate safe, secure, and accessible cryptocurrency use.
If these challenges can be addressed, cryptocurrency could be a transformative force in Yemen’s economy, providing new opportunities for financial inclusion and economic growth in a country that desperately needs both.
Conclusion
Cryptocurrency adoption in Yemen presents a unique opportunity for Yemen. This is simply because it offers a way to bypass financial blockades and the collapse of traditional banking systems.
While digital currencies like Bitcoin have shown potential for facilitating humanitarian aid and remittances, challenges such as infrastructure limitations, legal uncertainty, and security risks remain significant barriers.
If these obstacles are overcome, cryptocurrencies could provide a pathway to financial inclusion and resilience in Yemen, a country grappling with ongoing conflict. While the future of crypto adoption in Yemen depends on addressing these challenges, its success could significantly contribute to the nation’s recovery and economic rebuilding.
