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Yemen Turns to Decentralized Finance Amid Banking Sanctions
In Yemen, decentralized finance (DeFi) has emerged as a vital tool for navigating economic challenges brought on by U.S. sanctions. With traditional banking services disrupted, many Yemenis are increasingly adopting DeFi protocols to manage remittances, conduct peer-to-peer transactions, and bypass financial restrictions.
The Shift Toward DeFi Platforms
According to data from blockchain intelligence firm TRM Labs, over 63% of Yemen’s cryptocurrency-related web traffic is now tied to decentralized finance platforms. In contrast, global centralized exchanges account for just 18% of this activity. This shift reflects the growing reliance on decentralized systems in the country, particularly in areas controlled by the Houthis, where banking institutions are largely inoperable or unreliable.
The trend coincides with several rounds of U.S. sanctions targeting Yemen’s financial infrastructure. In April 2024, the U.S. Treasury imposed sanctions on the International Bank of Yemen, accusing it of facilitating financial transactions for the Houthis. These restrictions have further isolated Yemen’s banking system, prompting civilians to explore decentralized tools as alternatives.
Peer-to-Peer Transactions and Remittances
Peer-to-peer cryptocurrency transactions are gaining traction in Yemen for cross-border transfers and remittances. While the volume of these transactions remains relatively low, they demonstrate growing interest in decentralized financial infrastructure in the absence of formal banking options. This shift underscores the appeal of crypto as a solution for financial resilience in times of crisis.
TRM Labs noted that decentralized systems allow users to transact without intermediaries, making them particularly attractive in regions where traditional banking services have been disrupted. Local money service businesses are also adapting, offering crypto-related services alongside their conventional operations.
Surge in Crypto Activity Amid Political Changes
Recent political developments have further fueled crypto adoption in Yemen. A Yemen-based crypto exchange tracked by TRM Labs experienced a 270% surge in activity after the Houthis were relisted as a terrorist group by the Biden administration in January 2024. Activity spiked again by 223% following Donald Trump’s election and subsequent designation of the Houthis as a Foreign Terrorist Organization in early 2025.
As international sanctions continue to tighten, not only against the Houthis but also their key ally, Iran, TRM Labs expects crypto usage in Yemen to expand both in scale and sophistication. Civilians and sanctioned entities alike are likely to explore decentralized finance as traditional financial options become increasingly limited.
Global Examples of Crypto Adoption During Crises
Yemen is not alone in turning to cryptocurrency during times of economic instability. Across Eastern Europe, countries like Ukraine and Russia have witnessed increased adoption of DeFi protocols. Between 2023 and 2024, Ukraine recorded a 362% rise in large institutional DeFi transactions, while grassroots adoption surged with retail transfers climbing by 82.2% and 92%, respectively.
In Argentina, runaway inflation has driven residents to adopt stablecoins like USDT and USDC. Inflation reached 276% in March 2024, prompting a surge in local exchange activity as Argentinians converted pesos into digital dollars to protect their savings from devaluation.
Similarly, Venezuela’s economic struggles—marked by hyperinflation and capital controls—have positioned Bitcoin as a “lifeline” asset. Many residents rely on cryptocurrencies to preserve their wealth and access basic financial services.
With decentralized finance playing an increasingly significant role in regions facing economic hardship, its adoption continues to rise as individuals seek alternatives to traditional banking systems.
