110 million new users enter markets despite regulatory fears

Following the momentous crypto market rally in 2021, the sector has encountered a slew of obstacles in the past year, such as regulatory ambiguity, with assets like Bitcoin (BTC) experiencing significant sell-offs. Despite this downturn, there has been an exponential surge in the influx of users entering the cryptocurrency realm.

In this line, data acquired by Finbold indicates that the number of crypto users has soared to 417.5 million as of 2023, representing a year-over-year (YoY) growth of 36.88%. This translates to an addition of 112.5 million users compared to the 305 million recorded in 2022.

Asia takes the lead with 260 million users as of May 2023, marking a staggering 100% growth from the previous year’s figure of 130 million. North America follows with 54 million users, witnessing an increase of 3 million compared to the 2022 count of 51 million. Among the regions, Africa recorded a drop of 28% from 53 million to 38 million. European users also dropped from 43 million to 31 million. 

A breakdown of crypto ownership in relation to population per country indicates that Thailand ranks first in 2023, with a share of 9.32%. India is second with 7.23%, followed by Brazil at 6.98%. Pakistan ranks fourth with 6.4%, while France rounds out the top five with 5.9%.

Drivers of crypto user growth 

The growth in crypto user numbers can be attributed to several factors, including the fear of missing out (FOMO) phenomenon. During crypto downturns, these periods allow individuals to become involved in the market, hoping to capitalize on potential gains from their investments. 

Notably, the market is still experiencing a bear phase from the highs of 2021. Furthermore, the increasing mainstream adoption and awareness of cryptocurrencies have played a significant role in attracting new users. The accessibility and convenience of crypto platforms and exchanges have also made it easier for retail investors to enter the market. 

Moreover, the acceptance of cryptocurrencies as a form of payment by businesses has further boosted user growth. At the same time, in emerging markets with unstable economies and limited access to traditional banking services, cryptocurrencies have been embraced as an alternative and inclusive financial solution, driving adoption in these regions.

Despite the bearish outlook, the crypto market, primarily led by Bitcoin, experienced a temporary recovery in 2023, capitalizing on various incidents, including the banking crisis. Amid the crisis, the cryptocurrency space has been viewed as a potential hedge against the ongoing meltdown, which witnessed the collapse of major lenders in the US. This perception further fueled interest and investment in cryptocurrencies as individuals seeking alternative avenues to safeguard their wealth amidst the banking turmoil.

Growth amid bearish sentiments 

Despite the crypto sector facing one of its most challenging phases, marked by a sustained bear market, the global user growth can be considered remarkable. The growth has occurred in the wake of high-profile incidents such as the FTX crypto exchange collapse and the Terra (LUNA) ecosystem crash, partly resulting in an erosion of trust within the sector. 

On the other hand, the user count has also thrived despite the ambiguous global regulatory outlook for cryptocurrencies. Various jurisdictions, including the United States, appear to be accelerating a crackdown on the sector. For instance, the Securities and Exchange Commission (SEC) is currently engaged in high-profile cases likely to discourage investor involvement. For instance, the SEC has filed lawsuits against Ripple, the provider of XRP, and crypto exchanges Binance and Coinbase, alleging securities laws violations.

Market observers believe that regional crypto user trends are likely to be influenced by regulations. The Asian region dominates, driven by the increasing adoption of blockchain-based payment solutions in countries like India, China, Singapore, South Korea, and Japan, particularly within the banking, financial services, and insurance sectors. 

Impact of strict regulations 

Elsewhere, regions with stricter regulations, such as North America and Europe, are projected to lose crypto business to Asia-Pacific. This is further highlighted by the fact that Asia experienced the highest YoY user growth rate. 

One notable trend in usage indicates that Europe saw a drop. The drop has coincided with the region’s enactment of the Markets in Crypto Assets (MiCA) law. The law aims to create a legal framework designed for the market of crypto assets. The content of the law has been dubbed to act as the global benchmark. Elsewhere, Africa likely experienced the repercussions of the bear market, leading to a decline in user numbers, particularly considering the region’s lack of notable advancements on the regulatory front.

As the cryptocurrency market looks to recover from the ongoing downturn, the number of users will likely grow, especially led by regions that enact friendly regulations. Similarly, the user count might receive a boost from a potential increase in demand for cryptocurrency among banks and financial institutions and untapped potential in emerging economies.