Global Drivers of Cryptocurrency Infrastructure Adoption
49 Pages Posted: 14 Jan 2019 Last revised: 17 Apr 2019
Date Written: April 15, 2019
A vast digital eco-system of entrepreneurship and exchange has sprung up with Bitcoin’s digital infrastructure at its core. We explore drivers for infrastructure aimed at supporting the (non-hidden) supply-side and the (non-hidden) demand-side of bitcoins, through analysis of two novel datasets of Bitcoin nodes and merchants worldwide. Specifically, we investigate the role of legal, criminal, financial and social determinants on the adoption of Bitcoin infrastructure. We offer some support for the view that the adoption of cryptocurrency infrastructure is driven by perceived failings of traditional financial systems, in that Bitcoin infrastructure is more developed in locations with low trust in banks and the financial system, and in locations plagued by inflation crises. On the other hand, our findings also suggest that active support for Bitcoins is higher in locations with well-developed banking services (financial inclusion, banking competition). Finally, we find support for the view that bitcoin adoption is also partly driven by cryptocurrencies’ usefulness in engaging in illicit trade.
Keywords: Bitcoin network; Digital Currencies; Cryptocurrencies; Financial Technology (FinTech); Bitcoin nodes, Bitcoin Merchants
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