Yemeni citizens are increasingly turning to decentralized finance (DeFi) protocols as a means of banking themselves, according to TRM Labs. Additionally, the United States continues to sanction all members of the Houthi movement. This change comes as the US officially designates them a terrorist organization.

Yemen has been caught in the crossfire of a civil war between the Yemeni government and the Houthi militia since September 2014. We know that the US often targets financial infrastructure in Yemen to punish and disrupt Houthi activity. Their latest action, from April 17th, when they imposed sanctions on the International Bank of Yemen.

TRM Labs reported that internet infrastructure challenges and low financial literacy among the war-torn population have historically contributed to limited crypto adoption. Today, due in part to growing regulations on more conventional financial channels, a shift is clearly underway.

"However, there are signs of growing interest and usage driven primarily by necessity rather than speculation," - TRM Labs

The Biden administration tagged the Houthis as a Specially Designated Global Terrorist again in January 2024. Shortly after, one Yemen-based cryptocurrency exchange monitored by TRM Labs saw 270% growth in total volume. Nearly 48 hours later, the exchange would return to pre-spike levels of trade. It experienced a second extreme surge of 223% in the three-month period after US President Donald Trump was elected into office and the Houthis were declared a foreign terrorist organization by the US on January 22.

Individual local Yemeni businesses are using peer-to-peer crypto transactions to move money across borders for purchasing goods or conducting remittances. According to TRM Labs’ data, DeFi platforms account for the vast majority of Yemen’s crypto-related web traffic, over 63%—vastly outpacing any other significant category. In comparison, global centralized exchanges make up only 18%.

"Although these interactions do not necessarily imply high transaction volumes, they reinforce that for some individuals in Yemen, decentralized infrastructure may provide a necessary alternative to traditional payment rails," - TRM Labs

"The interest in DeFi services may reflect the appeal of systems that allow users to transact without intermediaries, particularly where local banking institutions are inaccessible or unreliable." - TRM Labs

Yemen currently lacks legislation governing the use of cryptocurrency.

"Given the intensifying international sanctions on the Houthis and their primary backer, Iran, the group’s use of cryptocurrency is likely to grow in both scale and sophistication," - TRM Labs

"As traditional financial avenues become increasingly restricted, decentralized digital currencies offer an alternative that is less susceptible to oversight and harder to trace." - TRM Labs