The U.S. drives the greatest share crypto activity in the world with over $1 trillion in transaction volume between July 2022 and June 2023, according to a new report from Chainalysis. Together with Canada, the region accounts for almost one-fourth of global transaction volume.
Large institutional investors are the key driver of the activity, with 76.9% of transaction volume in the region made up by transfers of $1 million or more, Chainalysis said in a blog post on Monday.
Activity in the region predictably contracted after the blowup of the FTX exchange and the start of the criminal trial of its former CEO, Sam Bankman-Fried. However, that appeared to be a smaller shock for the industry than the banking crisis in March, when Silicon Valley Bank was shut down by the regulators, a move that was followed with actions against other crypto-friendly banks like Silvergate and Signature.
"On-chain activity starts to tick back up beginning in June. As we see on the chart below, transaction size data suggests that pullback from institutional investors was the primary driver in the overall decline in activity, as retail users and sub-institutional pro traders’ estimated activity remained consistent," Chainalysis said.
The same banking shock could drive down stablecoin usage in the North America. According to Chainalysis, stablecoin use fell from 70.3% to 48.8% of the region's on-chain transaction volume over the past year, with the sector's market capitalization seeing its lowest point in over two years this summer.
Stablecoin activity is also shifting away from U.S.-licensed services, Chainlaysis said, reversing the trend seen late last year. Now, over a half of all stablecoins traded are flowing to non-U.S. licensed exchanges, the report says.
"U.S. regulators have a strong interest in exercising some regulatory authority over stablecoins, given the central role of USD-denominated reserves to these assets," Chainalysis said. "Stablecoin regulation also gives regulators a chance to help ensure that the U.S. is home to the cryptocurrency businesses that will play a big role in expanding how the U.S. dollar is used globally as the digital economy continues to grow. However, data suggests that more and more stablecoin activity is occurring through entities that aren’t licensed in the United States. "
According to Chainalysis, North America is still dominating global DeFi volume, but the share of decentralized protocols in overall volume has been declining over the past year. As of June, on-chain activity in the U.S and Canada was "split relatively evenly between DeFi and centralized exchanges," Chainalsysis said.
Disclaimer: The former CEO and majority shareholder of The Block has disclosed a series of loans from former FTX and Alameda founder Sam Bankman-Fried.
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