Does Sovereign Default Risk Explain Cryptocurrency Adoption? International Evidence from Mobile Apps

Abstract

We study the macroeconomic drivers of cryptocurrency adoption using mobile app data for the G20 countries. Among several factors, sovereign default risk is identified as a key determinant of crypto adoption. A 10% increase in sovereign CDS spreads is associated with a 2.9-4% increase in crypto app downloads and usage, and crypto adoption jumps in the months following news related to sovereign risk. These effects are larger in emerging markets and when ex ante sovereign default costs are high. We also find that the impact of inflation on crypto adoption is significantly influenced by the level of ex ante default costs.

Keywords: sovereign debt, consumer finance, cryptocurrency, mobile apps, fintech

JEL Classification: G15, G51, G23, G11, E42, E31