Chainalysis Crypto Adoption Index Accidentally Debunks Terror Financing, Sanctions Evasion Narrative
Lawmakers around the world are lobbying to regulate non-custodial services to combat terror financing and sanctions evasion. But non-sanctioned jurisdictions lead in DeFi adoption.
Six months ago, the Senate Banking Committee held its first official hearing on digital assets. Discussions on the now-passed GENIUS Act took center stage, and with it, discussions on the illicit use of cryptocurrencies.
As former CFTC Chairman Timothy Massad criticized, safeguards in the GENIUS Act only applied to centralized service providers, and not to non-custodial services. Being able to transfer digital assets between "self-hosted wallets" is the reason that "we've seen these things be used for sanctions evasion and for money laundering by Russian Smugglers, by Hamas, and by others," Massad stated.
To address these alleged risks, the White House has since tasked Congress to consider expanding the Bank Secrecy Act as well as the PATRIOT Act to digital assets. At the same time, the US Treasury is seeking comments on the application of Digital Identities to DeFi* services.
But an excerpt of Chainalysis' newest Crypto Adoption Index tells a different story.
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Sanctioned Jurisdictions Continue to Prefer Centralized Services
Every year, Chainalysis' Crypto Adoption Index ranks jurisdictions around the world based on their use of cryptocurrency. According to the excerpt, which lists the top 20 countries in cryptocurrency adoption, users in jurisdictions that are subject to US sanctions continue to prefer centralized services.
In March 2025, the US reclassified the Yemeni Ansar Allah Group, better known as the Houthis, as a foreign terrorist organization, as well as a specially designated global terrorist group. The Houthis, which control parts of Yemen in light of the country's ongoing civil war, have since been subject to targeted sanctions by the US Government.
While Yemen is not fully sanctioned, like Iran or North Korea, the US' targeted actions have caused issues for remittances and NGO payments in the country, as banks are increasingly de-risking Yemeni recipients as a whole, refusing to transfer funds. Last year, several Yemeni banks in Houthi controlled areas faced a cut off from the international SWIFT system.
While the Republic of Yemen now ranks 16th in overall cryptocurrency adoption, up from 54th place in 2024, it ranks 21st in received DeFi transaction volume. For volume received by centralized services, Yemen ranks in 15th place, indicating that Yemenis continue to prefer the use of centralized services. Notably, when adjusted for population size, Yemen ranks even worse in received DeFi transaction volume coming in on 29th place, and 12th place for retail centralized services.
Similarly, Venezuela, which has been subject to US sectoral sanctions such as oil and gold exports, ranks 18th in global cryptocurrency adoption, but 37th in received DeFi transaction volume. When adjusted for population, Venezuela ranks in 52nd place in received DeFi transaction volume, and third place in retail centralized services.
The only jurisdiction subject to US sanctions which ranks higher in DeFi transaction volume than in centralized services is Russia, coming in at 9th place for received DeFi transaction volume and 10th place in value received via centralized services. But, when adjusted for population size, Russia doesn't even make Chainalysis' top 20 adoption list.
The jurisdictions ranking highest in received DeFi transaction volume are India, the US, and Nigeria, further indicating that there is no correlation between sanctions and an increased use in DeFi.
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DeFi Removed as Standalone Subcategory
This year, Chainalysis has updated its methodology to exclude DeFi as a standalone category. According to the report, internal analysis revealed that DeFi constitutes a much smaller share of overall user activity, particularly when compared to centralized platforms, despite representing a significant amount of total transaction volume globally. Including retail DeFi use as a standalone category introduced "a disproportionate emphasis on a relatively niche behavior," Chainalysis states.
The retail DeFi subindex was consequently removed to avoid "over-optimizing for high-volume but low-frequency user behavior."
*For the lack of an official definition, we equate DeFi to all non-custodial services
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