Now picture doing that while the very financial system that you need to support you is being weaponized against you. We know it’s a frustrating and daunting challenge. That’s the new normal for millions of Yemenis, collateral damage in US sanctions targeting the Houthi movement. These sanctions, though imposed with the aim of suppressing illicit activity, are suffocating the bloodline of an already-collapsed country. Now we’re no longer just discussing tax cheats or terrorists funding their operations. We’re talking about working-class Americans starving because they can’t afford groceries, pharmaceuticals or gasoline. Are we really doing right by cracking down on this entire community?

Sanctions' Impact: A Humanitarian Crisis

The situation on the ground is dire. Years of war has eaten away at Yemen’s infrastructure, and millions of Yemenis are displaced and continue to starve. US sanctions do identify specific individuals and companies to target, but their reach goes much further. They block average Yemenis from conducting even the most basic financial operations. Think about it: you need to send money to your elderly parents in another city, but the bank is restricted. Now, when you go to buy medicine for your sick child, you’re locked out. Your account has been frozen. This isn’t just a hypothetical drill; this is real, everyday life.

The US Treasury has repeatedly sanctioned banks that they believe have contributed to Houthi support. Only recently, Yemen’s International Bank was sanctioned. Consider this: when you squeeze a balloon in one place, it bulges somewhere else. These sanctions do not address the issue at hand. Instead, they move it underground and usually hurt the most at-risk populations in doing so. It's like trying to fix a broken leg with a sledgehammer – you might stop the limp, but you'll probably cause more damage.

DeFi's Promise: A Financial Escape Hatch?

Enter DeFi, or decentralized finance. Then, out of nowhere, a beacon of optimism seems to land on the horizon. For a generation that has been mostly locked out of the legacy banking system, DeFi provides a unique second chance. No banks necessary, no intermediaries needed, just direct transactions between peers facilitated by the technology behind blockchain. Or we can skip the approved system entirely. These improvements will increase Yemenis’ ability to receive and send remittances, obtain credit, and otherwise participate in the global economy.

  • Remittances: Sending money home to family becomes easier and cheaper.
  • Cross-border payments: Bypassing traditional banking restrictions.
  • Access to credit: Opportunities for small businesses to grow.

This isn’t just about crystal balling or rich people getting richer. For many Yemenis, it's about survival. We’re not talking about some luxuries, we’re talking about access to the most basic financial tools that allow them to exist. This is necessity driving adoption, not greed.

When the Biden administration relisted the Houthis as a Specially Designated Global Terrorist organization, the exchange experienced a 270% volume increase. Even more so after the Houthis were reinstated as a foreign terrorist organization, at 223%. These numbers tell us more than just the unpredictable ups and downs of the market. They all demonstrate the desperation and ingenuity of a population hungry for an alternative to a broken system.

Ethical Quandaries: A Double-Edged Sword

Before we pronounced DeFi as the savior of Yemen, let’s pump the brakes. The reality is far more complex. The lack of regulation and clarity in the crypto space has created an open breeding ground for scams and fraud to thrive. With shockingly low financial literacy—and almost double Yemenis living on less than 1.90 per day—this opens up glaring holes for exploitation. Picture losing your life’s savings to a Ponzi scheme and being told there’s nothing you can do about it, no recovery, no social safety net.

In addition, the decentralized nature of crypto presents challenges for tracking and enforcement. This new development has the potential to be a huge victory for everyday people. It also opens the door for illegal use, which could allow sanctioned non-state actors such as the Houthis to fund their activities. Is this the parallel shadow financial system that we’re building, empowering conflict and erosion of our own sanctions regime by accident? It’s a question we all can’t afford to not be asking.

DeFi platforms have already overtaken all other crypto web traffic to Yemen (63%). In fact, centralized exchanges only make up a minority share (18%). That’s due to the fact that the Yemeni chic are seeking P2P crypto transactions for remittances and cross-border cash transfers.

A Call for Balance: Sanctions with a Human Face

The conflict in Yemen calls for a more sophisticated response. We reiterate that sanctions should be as targeted and precise as possible, so they have minimal negative impact on ordinary citizens. We need to ramp up humanitarian aid, invest in education and financial literacy programs, and support local initiatives that empower communities.

Its time for us to stop focusing solely on limiting access. We can empower the potential of DeFi to do great things. To unleash that power, we need regulatory frameworks that protect consumers while allowing innovation to flourish. That starts by truly engaging and partnering with local communities to identify solutions that will work best to meet their unique needs and challenges.

It would be dangerously naive to believe that the Houthi organization won’t utilize Cryptocurrency. As more traditional financial options dry up, individuals will inevitably turn to cryptocurrency as an alternate means with less critical paper trails. This transition is poised to not only increase the use of cryptocurrency, but increase its sophistication.

DeFi in Yemen is a double-edged sword. On one hand, it provides a promising innovator’s path to economic recovery, but on the other, it presents tremendous pitfalls and dangers. Whether it plays out as a beacon of hope or a sanction-spawned mirage will ultimately rely on the decisions that we make today. Let’s build better, with compassion and respect for humanity. Let’s not make our attempts to stop terrorism end up unintentionally punishing the people we say we want to assist. The world is watching, and the future of Yemen is at stake.