Two Faces of Political Violence: State Conflict, Civilian Insecurity, and Cryptocurrency Demand

Abstract

We examine how political violence shapes retail cryptocurrency demand, leveraging this setting to reconcile two competing views of cryptocurrencies: as speculative risk assets versus portable cross-border stores of value. We merge monthly country-level crypto exchange app downloads and active user metrics across G20 countries from August 2015 to June 2022 with granular, event-level conflict data. We distinguish between state conflict, which signals macro-political risk, and civilian insecurity, which directly impacts households through localized predation. In two-way fixed-effects panel regressions, state conflict predicts reduced crypto participation, whereas civilian insecurity predicts heightened crypto adoption and participation. We further show that the negative state-conflict effect intensifies under adverse institutional and crypto market conditions, whereas the positive civilian-insecurity effect is strongest where households have access to digital financial rails. Overall, whether crypto functions as a speculative asset or a digital escape hatch depends on the modality of instability and the accessibility of digital financial infrastructure.