Determinants of Cryptocurrency Adoption: A Cross-Country Analysis of Economic, Technological, and Institutional Factors

Abstract

This research investigates the national factors influencing cryptocurrency adoption at the country level, utilizing cross-sectional data from 101 countries. The study aims to identify the economic, technological, institutional, and regulatory determinants shaping the rate of cryptocurrency adoption across nations. Specifically, the analysis incorporates variables such as inflation levels, financial inclusion scores, technological infrastructure scores, clarity of laws governing cryptocurrencies, institutional credibility indexes, globalization indexes, and exchange rate volatility. The model accounts for country-specific and time-specific effects to control for unobserved heterogeneity within the statistical framework. The study employs a dynamic panel ARDL estimation method, along with quantile regression and Granger causality tests, to capture both short- and long-term effects and uncover non-linear relationships among variables. The results indicate that higher inflation and increased exchange rate volatility are positively associated with greater use of cryptocurrencies, explaining that such economic conditions drive individuals to seek alternative financial instruments. Additionally, the adoption and ownership of cryptocurrencies are facilitated by improved financial inclusion and advanced technological infrastructure, which equip individuals with the necessary resources to engage with digital currencies. Transparent and supportive regulatory environments, along with higher levels of institutional trust, are also linked to elevated rates of cryptocurrency adoption, highlighting the significant influence of governance and legal systems in the diffusion of digital assets. These findings underscore that cryptocurrency adoption is a multifaceted phenomenon. To effectively influence adoption rates, policymakers should address economic policies, promote technological advancement, clarify regulatory frameworks, and implement measures to build institutional trust.

Keywords: Cryptocurrency Adoption, Economic Determinants, Regulatory Framework, Technological Infrastructure