Perceived Trust and Confidence for Cryptocurrency Adoption: What Lies Ahead?

Introduction

Cryptocurrencies have become frequent headlines in the official press and unofficial social media platforms. Since 2009, cryptocurrencies have been increasingly recognized as an emerging channel for private wealth accumulation despite the risks of investors trading in highly volatile markets and often under unfavorable government scrutiny (Atkins et al., 2021). Cryptocurrency markets, the most prominent being Bitcoin and Ethereum, have envisioned a decentralized blockchain ecosystem to facilitate cryptographically secured peer-to-peer transactions for digital inclusion (Lai & Liew, n.d.). Adopting a decentralized blockchain ecosystem that promises high returns for private wealth accumulation in highly volatile and risky cryptocurrency markets may be associated with a more complex interplay of social interactions with people and institutions.

Over the last two decades, the socio-economic landscape of the world has changed drastically due to rapid technological development and the rise of millennial generations who are native netizens. The unprecedented coronavirus (COVID-19) pandemic and various lockdown containment measures have plunged the global economy into a deep recession and have plummeted per capita income, forcing millions into extreme poverty (World Bank, 2021c). The effects of socio-economic disruption are magnified in countries that are more vulnerable to external shocks. Within the countries, perceived trust in people and confidence in institutions become more crucial during this pandemic to maintain social order and restore the socio-economic stability of society. Meanwhile, any erosion of trust in the government, political parties, or other public agencies is likely to compromise public confidence in their ability to maintain wealth creation and wellbeing development opportunities for the people (Morselli et al., 2015).

Current trends and extant research indicate that the world population is increasingly attracted to the cryptocurrency markets, both rich and poor. Traditionally, the financial markets tend to favor the high-income regions and marginalize the lower-income regions (Honohan, 2008). However, studies have shown that cryptocurrencies have a positive utility in regions where domestic currencies are weak and when people are desperate for a renewed, reachable, alternative investment (Ellsworth, 2021). The global cryptocurrency adoption has skyrocketed to over 880% since the pandemic with pervasive peer-to-peer transaction volume, mainly under US$10,000 worth of cryptocurrency, coming from developing countries that tend to limit outbound currency transfer or face domestic currency devaluation (Chainalysis Team, 2021). Past studies and the current digital phenomenon seem to indicate that some regions may have a better take-up rate for cryptocurrency adoption than others. A plausible reason could be the different levels of subjective public perceptions related to trusting other people and having confidence in multilateral institutions such as mass media, political, financial, private, and public institutions.

Therefore, this chapter seeks to answer an overarching research question as follows: “do trust in people and confidence in institutions contribute to cryptocurrency adoption?” The following two research objectives are addressed:

• 1.

  To examine whether public perceptions of trust in people and confidence in institutions will contribute to cryptocurrency adoption.

• 2.

  To identify whether contextual factors of the individuals (age, gender) and countries (income inequality, national economic development, region, income level classification) will influence cryptocurrency adoption.

Using large-scale international surveys and national databases, our empirical model employs quantitative analysis to synthesize subjective and objective measures investigating the social impact of perceived trust and perceived confidence on cryptocurrency adoption. Results derived from the individual and regional levels of analysis provide insightful discussions towards a generalizable understanding of the future of cryptocurrency adoption in the world.