It seems that this situation is due to strict control of capital movements and a repressive attitude on the part of local governments.
Some data published by Arcane Research seems to suggest that although there is a strong demand for P2P crypto trading platforms in the Middle East, regulations and lack of infrastructure are slowing down their adoption: undocumented migrants, once arrived in Western countries, have used these platforms for remittances.
According to a report published by the company in October, the volume of peer-to-peer crypto trading (P2P) across the Middle East and North Africa is about 15% of its value at the end of 2017 on the LocalBitcoins and Paxful platforms: a trading volume of about $682,000 per week.
The document states:
„In general, there are several centralised exchanges providing these services in the more developed Arab states. However, other countries in the region do not have this infrastructure and also lack financial and political stability, but nevertheless [have not] registered the expected increase in the adoption of P2P exchange cryptos“.
In the Middle East countries facing inflation there is a strong demand for P2P services, as they allow residents to take money out of the state or simply convert it into crypto. The Lebanese Lira suffered enormous inflation in 2020. Iran, on the Bitcoin Up platform other hand, due to the low cost of electricity, has attracted the attention of miners but its currency has also been devastated by ruinous hyperinflation since the US reintroduced sanctions in 2018.
Despite this, P2P exchanges in both Lebanon and Iran are in serious trouble because of the „poor quality of Internet connections and political regimes that take a negative view of Bitcoin“. On the other hand, Arcane Research has found that some „less sophisticated“ methods of exchanging Bitcoin (BTC) P2Ps are growing significantly in the region during this period, often circulating through messaging applications such as WhatsApp.
The report also indicated that undocumented migrants living in Western countries are turning to remittance cryptos, using gift cards in combination with P2P trading platforms, where local laws make it more difficult to send cryptos.
In September, Paxful announced that it would no longer provide its services in Venezuela due to regulations and sanctions issued by the US Office of Foreign Assets Control. Despite this, the country accounted for 42% of P2P trading volume across Latin America, which now amounts to $4.3 million.
Arcane Research suggests that Venezuelan immigrants have found „alternative solutions“ to send money home despite „crypto restrictions and strict control over capital movements“.
According to the researchers, migrants can buy gift cards from a retailer such as Amazon or simply a prepaid credit card and send a photo to family and friends abroad. Recipients can then sell it in exchange for Bitcoin using a P2P platform and convert it into local currency. The paper states that such a remittance method is fast and reliable, but involves considerable expense.
Bitcoin is also a good way to get capital out of your country:
„Bitcoin can be used by Venezuelans as a tool to export capital. Hyperinflation is a huge problem for Venezuela: it has caused more than 10% of the population to leave the country“.