Yemenis Turn to DeFi as US Sanctions Target Houthi Group

Yemenis Turn to DeFi as US Sanctions Target Houthi Group

As the civil conflict in Yemen drags on and international sanctions tighten, citizens are increasingly turning to decentralized finance (DeFi) platforms as a lifeline. A new report by blockchain intelligence firm TRM Labs, published on April 17, reveals that DeFi now accounts for over 63% of Yemen’s crypto-related web traffic — a stark contrast to the 18% seen on global centralized exchanges.

DeFi as a Tool of Financial Resilience

Yemen’s financial system has been significantly weakened by years of war between government forces and the Iran-backed Houthi rebel group. On top of internal disruptions, U.S.-led sanctions have further strained the country’s access to global financial infrastructure. The most recent blow came on April 17, when the International Bank of Yemen was sanctioned by the U.S. Treasury in an effort to choke off financial lifelines to the Houthis.

In this hostile economic environment, DeFi has emerged as a crucial alternative for everyday Yemenis.

“For those who use cryptocurrencies in Yemen, the ability to bypass the disruption in local financial services offers a modicum of financial resilience,” TRM Labs stated. “Especially as banks can be difficult to access or are simply inoperable due to the ongoing conflict.”

A Necessity, Not a Speculation

Unlike other regions where crypto adoption is often driven by investment speculation, TRM Labs notes that in Yemen, the growing interest in crypto — particularly DeFi — is being driven by necessity. Poor internet infrastructure and low financial literacy previously limited crypto uptake in the country, but current conditions are forcing change.

“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,” the report said.

DeFi platforms account for most of Yemen’s crypto-related web traffic, followed by centralized exchanges. Source: TRM Labs

Peer-to-peer crypto transactions are also being used for remittances and cross-border fund transfers, offering a critical financial tool in a country where conventional banking systems are unreliable or inaccessible.

Sanctions Fueling Crypto Adoption

Yemen’s regulatory framework remains silent on crypto use. However, TRM Labs suggests that escalating international sanctions could accelerate crypto adoption further. In January 2024, the Biden administration relisted the Houthis as a Specially Designated Global Terrorist (SDGT) group. Following this move, a Yemen-based crypto exchange monitored by TRM experienced a 270% spike in transaction volume.

While that surge later subsided, another 223% increase was observed in the three months after the U.S. again designated the Houthis as a terrorist organization under President Donald Trump’s administration.

“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 warned.

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

Looking Ahead

While DeFi's role in Yemen is currently small in terms of transaction volume, its growing relevance underscores the power of decentralized systems in regions plagued by conflict and financial exclusion. With no clear end to Yemen’s war or the sanctions in sight, DeFi may continue to evolve from an underground solution to a mainstream financial necessity for many Yemenis.