Exploring Cryptocurrency Adoption
Professor Andrew Urquhart, a prominent figure in the field of Finance and Financial Technology, leads the Department of Finance at Birmingham Business School (BBS). In this fifth installment of the Professor Coin column, I aim to shed light on significant insights drawn from academic research regarding the adoption of cryptocurrencies. This article will delve into the factors influencing the uptake of digital currencies.
Growth and Impact of Cryptocurrencies
Cryptocurrencies have undeniably expanded in scale, diversity, and significance, highlighting their increasing influence within the traditional financial landscape. Initially, these digital currencies were primarily exchanged among a small group of tech enthusiasts. However, the launch of Bitcoin futures in 2017, along with the introduction of various derivative instruments and the anticipated Bitcoin spot ETF debut in January 2024, has attracted a broader range of investors to this novel asset class.
The Role of Blockchain in the Economy
The fourth industrial revolution is significantly characterized by advancements in artificial intelligence, communication technologies, the Internet of Things, and blockchain. According to PwC, the integration of blockchain technology is expected to enhance the global GDP by an impressive $1.76 trillion by 2030. China has identified blockchain as one of its top five strategic priorities, while nations like Germany, Japan, the UK, and France are also keen to leverage its potential economic benefits, collectively estimated to exceed $50 billion. The rising interest from investors in recent times may have forever altered the landscape of cryptocurrency users, with variations in adoption influenced by industry sectors, geographical regions, regulatory frameworks, and political contexts. This column will explore the various catalysts driving cryptocurrency adoption worldwide.
Macro Indicators and Adoption Trends
Recent research has investigated the correlation between macro-national developmental factors and the deployment of cryptocurrencies across 137 countries. Notably, the findings indicate that nations with higher education levels, advanced human development, democratic governance, regulatory quality, and substantial GDP are more inclined to embrace cryptocurrencies. Conversely, countries with limited economic freedom and higher corruption levels tend to adopt these digital currencies less frequently, suggesting that open and democratic nations are at the forefront of cryptocurrency adoption.
The Importance of Trust in Adoption
Having established the economic and state-related variables influencing adoption across different regions, an important question arises: what role does trust play? Trust is fundamentally a social construct that fosters economic growth, financial development, and inclusion. However, recent decades have seen a decline in trust levels. As European Central Bank President Christine Lagarde noted, “In this age of diminished trust, it is the financial sector that takes last place in opinion surveys.” Research conducted by Jalan et al. (2023) reinforces the findings of Bhimani et al. (2022), demonstrating that countries with higher levels of trust exhibit greater interest and adoption of cryptocurrencies. A more in-depth study by Saeedi and Al-Fattal (2025) reveals that women tend to prioritize regulatory trust more than men, while older individuals place greater emphasis on social trust.
Decentralized Finance (DeFi) Adoption Insights
Turning our attention to the distinction between cryptocurrency adoption and decentralized finance (DeFi), recent work by Nguyen and Nguyen (2024) indicates that high cryptocurrency adoption often results from a combination of factors such as population size, inflation rates, low social connectedness, democratic governance, and uncertainty avoidance. In contrast, DeFi adoption appears to be primarily influenced by high levels of human development, population, and financial advancement.
Impact of Adoption on Cryptocurrency Performance
The relationship between different types of adoption and cryptocurrencies raises further questions. Research by Rzayev et al. (2025) illustrates that early adopters significantly influence cryptocurrency returns and enhance price efficiency, whereas late adopters tend to introduce more volatility and inefficiency into the market. Thus, early adopters play a crucial role in the performance of cryptocurrencies.
In summary, the academic literature highlights that cryptocurrency adoption varies widely across the globe, with key economic and state indicators shedding light on these trends. Moreover, the nature of adoption influences the overall performance of cryptocurrencies, suggesting that not all forms of engagement yield equal results.
