Santiago Carbó-Valverde, Pedro J. Cuadros‐Solas, Francisco Rodríguez Fernández
Acknowledging the potential threats posed to financial stability by owning cryptoassets combined with a lack of financial literacy, this paper investigates the relationship between financial literacy and cryptocurrency ownership using machine learning methods. Analyzing 2121 survey responses, it shows that financial literacy emerges as a crucial factor in cryptocurrency ownership, even when accounting for other factors such as age, income, and digital activity. A neural network model reveals that a unit increase in financial literacy reduces the probability of cryptocurrency ownership by 0.2. Causal forest analysis indicates that financial literacy bias positively impacts ownership likelihood (a point estimate of 75.30 %). However, the bias-corrected financial literacy measure has a negative effect of −25.40 % on ownership likelihood. This reveals that cognitive biases, particularly overconfidence, as a significant influence on cryptocurrency ownership. These results show that individuals with more financial literacy and with less biased self-assessments are less likely to hold cryptocurrencies.
This paper explores the evolving role of financial literacy in the context of cryptocurrencies, highlighting key challenges such as market volatility, security risks, and regulatory uncertainty. It also discusses the opportunities that decentralized finance (DeFi), portfolio diversification, and accessible educational resources present for improving financial literacy. The paper emphasizes the need for traditional financial education to adapt to the complexities of digital assets and decentralized systems. Recommendations include integrating cryptocurrency knowledge into curricula and promoting risk management strategies. Future research should focus on regulatory frameworks and the impact of DeFi on financial inclusion.
This research study offers a comprehensive overview of current advancements in financial practices in the United States. This research will examine recent shifts in American financial habits and offer stakeholders guidance on how to effectively manage the evolving financial landscape. A thorough assessment of prior literature reviews and empirical studies on digital finance in the US is part of the research methodology.The literature review focuses on how developments in financial technology (FinTech), regulatory changes, a growing emphasis on sustainability, and shifting consumer behavior have significantly altered the financial sector.. The influence of regulatory barriers, ESG integration, evolving consumer behavior, and the complex interactions affecting US financial practices are the main topics of discussion. The results underscore the significance of digital transformation, regulatory impediments and campaigns, consumer inclinations, the advantages and challenges of decentralized financing (DeFi), and cybersecurity and privacy issues. Recommendations are provided based on the results to enhance regulatory flexibility, raise financial literacy and awareness, fund cybersecurity infrastructure, encourage cooperation and information exchange, welcome responsible innovation, and track and react to market dynamics. By putting these recommendations into practice, stakeholders can better navigate the complexity of digital banking in the US and foster innovation, inclusion, and trust in the digital financial ecosystem while averting the dangers and difficulties that come with it.
The growing popularity of cryptocurrency as an investment choice among millennials demonstrates their inclination toward digital advancements and openness to exploring diverse investment opportunities. The study examines how financial literacy factors impact experience regret, investment decisions, and risk tolerance, while financial literacy also affects investment decisions, with experience regret and risk tolerance acting as a mediator. The study comprises 295 participants from the millennial demographic in Indonesia who are engaged in cryptocurrency investment. The data collection techniques employed in this study involve non-probability sampling methods through the distribution of questionnaires. The analysis in this study employs Structural Equation Modeling (SEM) in conjunction with Partial Least Squares (PLS) analysis tools. The results of this study suggest that financial literacy positively impacts regret experience, investment decisions, and risk tolerance with the respective sample values of 0.146, 0.397 and 0.449. Additionally, regret experience negatively influences investment decisions with a sample value of –0.385, while risk tolerance positively influences investment decisions with a sample value of 0.198. Financial literacy has a negative impact on investment decisions when regret experience acts as a mediator with a sample value of –0.056, but a positive impact when risk tolerance serves as a mediator with a sample value of 0.089. This complex relationship highlights the importance of considering multiple factors, including financial literacy, regret experience, and risk tolerance, in understanding and predicting investment decisions among individuals, particularly in the context of the millennial generation investing in cryptocurrency in Indonesia.
Abstract Australians are embracing new forms of digital finance products and services, which includes purchasing cryptocurrencies and non‐fungible tokens (NFTs). There has been an increase in investment scams associated with cryptocurrencies. In this article, we sought to understand from cryptocurrency and NFT investors, who is vulnerable and what vulnerabilities exist. We surveyed 745 Australians aged 18 and over who have purchased cryptocurrencies or NFTs. We used sociological perspectives of consumer vulnerability that focus on internal and external factors to analyse our findings. We found that both socioeconomic advantaged and disadvantaged Australians are vulnerable. The vulnerabilities include concerns over security, unsolicited advice, limited options for learning, and insufficient financial and IT literacy. The findings suggest that online financial education is needed from trusted independent sources to help combat scams and to keep Australians and their crypto assets safe. We recommend that more opportunities to educate individuals about alternative forms of financial products are offered in compulsory, vocational and higher education settings.
O. Felix Ayadi, Oluseun Paseda, Babatunde Olufemi Oke, Abiodun Oladimeji
Purpose Given the many activities of Nigerian investors in the crypto ecosystem, this paper investigates the level of their awareness, attitudes, risk tolerance, experience, reasons for investing and level of financial literacy. Design/methodology/approach The research approach is based on a self-administered questionnaire. The Organization for Economic Cooperation and Development (OECD) permitted the use of its reliable and validated survey instrument, administered in Malaysia, the Philippines and Vietnam in 2019. The results are tabulated and analyzed. Findings The key results include the participation of respondents, who are generally young males, not fully financially literate but risk-averse. Many held the false view that investing in global markets is a higher risk than in national markets. Their reasons for investing in crypto include the fear of missing out on good opportunities and the desire to have fun. The results also revealed that social media, conversations with non-experts and online articles are among the most used investment information sources, highlighting the role of digital platforms and informal discussions in shaping perceptions and knowledge about cryptocurrencies. Investments in cryptos are financed through savings, regular monthly budgets or borrowed from friends or family. As for specific attitudes to risk, the results suggest that for most respondents, preserving their invested capital is of paramount importance. Originality/value The importance of this research also resides in the possibility of comparing the crypto ecosystem in Asia with Nigeria because the same OECD data instrument is employed in data collection. Moreover, this study is the most comprehensive research about Nigerian investors in cryptocurrencies.
This study investigates the implications of the interaction of financial literacy, regulatory technology, and decentralized finance applications for financial sector development. A two-step analytical regression approach on EViews 10 was used, which performs a one-factor analysis for each variable to identify the individual impact of each factor. A linear FMOLS approach was used to evaluate the cooperative effect of integration. The methodology was implemented on a dataset comprising 2,880 observations from 23 financial institutions in Jordan.The findings support the hypothesized dynamic interrelations between the essential Fintech factors relevant to the sustainable development of the financial sector, including significant and insignificant factors with the impact of inflation, which provides an adequate understanding of Fintech’s evolution. Additionally, the outcomes consider post-2017 regulatory changes that reflect the role of supervision and regulation for the financial sector’s flexibility and efficiency. Therefore, the results reveal the essential contribution of integrating decentralized finance applications, financial literacy, and regulatory technology to the development of Jordan’s financial sector. Financial literacy serves as a facilitator, regulatory technology is a compliance enabler, and decentralized finance applications are driving forces of innovation and financial inclusion, ensuring a robust and sustainable financial ecosystem. It is shown that the interaction of factors forces the sector’s development, reflecting the world’s trend in digital inclusion and viable financial development.
Vaidehi Pandurengan, Badriya Nasser Said Al Shammakhi
Purpose The current research takes a closer look at the investment intention of Generation Z and its relation to investing in a speculative market. The study applies the theory of planned behaviour (TPB) to understand the dominant factors leading to Generation Z investment decisions in speculative markets. The main objective is to identify whether these decisions are learnt decisions or herd behaviours. Design/methodology/approach Structural equation modelling is used to evaluate the research model, and examine the mediation effect of financial literacy using bootstrapping in AMOS software. Information was gathered from 271 students studying at the University of Technology and Applied Sciences. The questionnaire used for the survey was adapted from previous related studies examining the TPB. Findings The findings show financial literacy and behavioural outcome (attitude) are key components associated with investment intention. Motivation to comply (subjective norm) affects the intention to invest if mediated by financial literacy. The subjective norm has no bearing on the intention to invest in a speculative market. This implies social peers have no bearing on their intention to invest unless mediated by financial literacy. Research limitations/implications The main limitation of the study is that the group from which the sample is drawn consists of all students at a state-funded university who receive stipends. This limits the applicability of related findings. Furthermore, the variables have dynamic properties, which implies their impacts may vary over time. Practical implications Generation Z comprises a large number of small investors who can make a significant difference to the overall economic trends of the country. The digital world, which is time- and space-infinite, is shaping the next generation. It is only possible to reach and sway their opinions by conducting extensive behavioural science research. Social implications Academic institutions ought to be viewed as a resource for conducting additional in-depth research on a variety of subjects to assist and shape the current generation for a better future. Originality/value Although the TPB has been used by many researchers to explore the behavioural intention of Generation Z, very few have used financial literacy as a perceived behaviour control to study its direct and indirect effects on behaviour intention.
Cryptocurrencies and blockchain have become a global phenomenon transforming peo-ple's relationships with technology and offering innovative tools for businesses and individuals to strive in a digital age. However, little is still known about the main drivers of cryptocurrency ownership, especially in emerging markets. Based on a representative online survey among 573 Brazilian digital platform investors, we find that crypto investors tend to be young, male, more tol-erant to risk, less optimistic in their economic views, and consider themselves as ‘better’ investors compared to non-crypto online traders. While crypto and non-crypto investors have similar edu-cational backgrounds, our results show that cryptocurrency literacy positively and strongly relates to cryptocurrency ownership and intentions to invest in cryptocurrency. A gender gap among cryptocurrency investors has been confirmed. The findings further suggest that sophisticated in-vestors are more likely to hedge pessimistic economic expectations using cryptocurrency than their unsophisticated peers. We also find significant heterogeneity among cryptocurrency investors (e.g., early x late adopters) on attitudes and beliefs. The insights into digital investors' intentions to invest in cryptocurrency can be valuable for policymakers in designing strategies for the broader adoption of digital assets in the era of a decentralized economy, considering the planned adoption of CBDC in Brazil.
Samuel Oladiipo Olabanji, Tunbosun Oyewale Oladoyinbo, Christopher Uzoma Asonze, Chinasa Susan Adigwe · 6 authors
The integration of cryptocurrencies, particularly Bitcoin, into retirement savings plans has recently garnered significant attention. This interest has been amplified by the U.S. Securities and Exchange Commission's approval of Bitcoin Exchange-Traded Funds (ETFs) in January 2024 and Fidelity Investments' decision to include Bitcoin in their 401(k) plans. These landmark developments represent a paradigm shift in retirement investment strategies, merging traditional financial planning with the dynamic and volatile world of cryptocurrencies. The entry of Bitcoin introduces novel challenges, including increased volatility and regulatory uncertainty, necessitating a comprehensive examination of its impacts on retirement savings. The study sought to explore the role of Financial Technology (FinTech) in managing these risks and assess the adequacy of current regulatory frameworks. Employing a quantitative research approach, the study collected data from 386 participants, including FinTech practitioners and investment portfolio managers through a survey that combining closed-ended and open-ended questions. Multiple regression was used to analyze the relationships between variables such as FinTech integration, regulatory compliance, and the risk associated with cryptocurrency-inclusive retirement portfolios. The study revealed that the inclusion of Bitcoin significantly increases portfolio volatility. It also found that advanced FinTech data management techniques significantly enhance risk mitigation, while current regulatory frameworks are inadequate for governing the inclusion of cryptocurrencies in retirement plans. A comprehensive framework combining FinTech and regulatory compliance was shown to effectively reduce investment risks. The study recommends cautious consideration of cryptocurrencies in retirement portfolios, with an emphasis on assessing the risk appetite of participants. It advocates for dynamic regulatory frameworks and enhanced use of FinTech for real-time risk management. The study suggests that retirement plan providers should adopt an integrated approach, combining technological innovations with regulatory oversight, to navigate the complexities of cryptocurrency investments effectively.
Cryptocurrency owners without sufficient financial literacy and risk tolerance may be financially vulnerable, as the cryptocurrency market is highly volatile and lacks consumer protections. Our study divides cryptocurrency owners into three groups based on their purpose for holding cryptocurrencies-for investment only (investors), for transactions only (transactors), and for a mix of investment and transactions (mix users)-and examines how each group correlates with financial literacy and risk tolerance compared to consumers who do not own cryptocurrencies (nonowners). Using the 2022 Survey of Household Economics and Decisionmaking, we find that investors and mix users are significantly or moderately more financially literate and risk tolerant than nonowners, but transactors are less financially literate and slightly more risk tolerant than nonowners. We also find that the three groups of cryptocurrency owners vary by demographic and financial characteristics. Our findings highlight that transactors could be particularly financially vulnerable in the absence of consumer protections in the cryptocurrency market.
Korean Abstract: 세계적으로 탈중앙화금융(decentralized finance: DeFi) 거래가 급격히 증가하고 있으며 국내에서도 거래 규모가 증가하고 있어 관심이 커지고 있다. 탈중앙화금융이란 중앙화금융 (centralized finance: CeFi)에 대비되는 말로서 중앙화금융에서 이용되는 금융기관의 중개 없이 암호자산(또는 가상자산)의 거래가 이루어지는 금융을 말한다. 탈중앙화금융이 가능한 것은 바로 ‘거래정보연결기술’(blockchain)을 기반으로 하는 ‘자동계약이행체계’ (smart contract)가 개발되면서 정보통신망에서 개설된 운영체계(protocol)에서 암호자산 거래가 자동적으로 이루어지기 때문이다. 거래 비용이 절감되고, 누구나 거래 참여가 가능하며, 투자에 따른 수익을 올릴 수 있어, 거래 규모가 커지고 있다. 탈중앙화금융은 전통적인 금융시장과 연결되어 있어 금융안정에 미치는 영향도 커 규제의 필요성이 제기 된다. 그러나 아직 탈중앙화금융 거래에 대한 규제 체계는 정립되어 있지 않아 법제 정비가 필요하다. 탈중앙화금융 거래의 유형을 살펴보면, 탈중앙화 예치ㆍ대여 거래, 탈중앙화 자산운용 거래, 탈중앙화 파생상품 거래, 탈중앙화 보험 거래, 탈중앙화거래소에서 이루어 지는 암호자산 거래가 있다. 탈중앙화금융 거래에 대한 규제 방향은 크게 세 가지 방안을 제시할 수 있다. 첫째는 「은행법」등 금융 관련 법률들의 해당 조항에 대한 유권해석을 통 해서 규제하는 방안, 둘째, 관련 법률들을 개정해서 명확하게 규제를 하는 방안, 셋째, 암호 자산 거래 규제 관련 일반법인 「가상자산 이용자 보호 등에 관한 법률」을 개정하여 탈중앙 화금융 거래 규제에 관한 규정들을 포함시키는 방안이다. 이 중 탈중앙화금융의 특성을 반영한 효율적인 규제 체계를 만들 수 있는 셋째 방안이 바람직한 방안이라고 판단된다. 그래서 이 법률에 담아야 할 탈중앙화금융 거래 규제 내용은 ① 탈중앙화금융 운영체계를 개설ㆍ운영하는 운영업자에 대한 등록제 도입, ② 운영업자의 투자자에 대한 설명 의무, ③ 이용수수료ㆍ수익률 등의 공시 규제, ④ 거래 및 운영 현황 공시 규제, ⑤ 광고 규제, ⑥ 전산보안 체계 구축 의무, ⑦ 운영업자의 감독기관에 대한 운영 현황 등 보고 의무, ⑧ 분쟁조정 등 분쟁해결 절차 등이다. English Abstract: Recently, “decentralized finance” (DeFi) is rapidly growing in crypto-asset markets. DeFi means decentralized applications (Dapps) providing blockchain financial services using smart contracts, including staking and lending crypto-assets, exchange, insurance, derivatives, and asset management services. DeFi typically operates without centralized intermediaries (i.e., traditional financial institutions) and uses open protocols. Although the size of DeFi is rapidly growing globally and domestically, a regulatory regime for DeFi has not yet been firmly set up, and a regulator in each country has not yet established a detailed plan and strategy to regulate the DeFi industry. Thus, many investors may incur losses partly arising from the DeFi operator’s misconduct, unlawful activities, or unfair crypto-asset trading. Moreover, DeFi may impact financial stability since it closely relates to traditional financial systems and the real economy. Considering this current situation, this article seeks to review the current developments of DeFi and to suggest how to regulate DeFi markets. In particular, in specifying a regulated entity, this paper recommends that an operator of DeFi protocols be a regulated target regardless of the existence of governance token holders who influence the decision of a protocol’s operation. Further, this article argues that the recently enacted “Virtual Asset Investor Protection Act” should be revised to regulate DeFi, comprised of those requirements, including an operator’s registration, disclosure of fees and operation status, maintenance of a robust cyber-security, reporting to a regulator, and regulating an operator’s advertisements, rather than revising the current relevant laws, such as banking law, capital market law, and insurance law.
Daniela Balutel, Walter Engert, Christopher S. Henry, Kim P. Huynh · 6 authors
Abstract We measure crypto and financial literacy using microdata from the Bank of Canada’s Bitcoin Omnibus Survey. Our crypto literacy measure is based on three questions covering basic aspects of Bitcoin. The financial literacy measure we use is based on three questions covering basic aspects of conventional finance (the “Big Three”). We find that a significant share of Canadian Bitcoin owners have low crypto knowledge and low financial literacy. We also find gender differences in crypto literacy among Bitcoin owners, with female owners scoring lower in Bitcoin knowledge than male owners. We do not, however, find significant gender differences in financial literacy amongst Bitcoin owners. In contrast, non-owners show gender differences in both crypto and financial literacy.
Sergio Luis Náñez Alonso, Miguel Ángel Echarte Fernández, Konrad Kolegowicz, David Sanz Bas · 5 authors
Los países de la región del Caribe, Centroamérica y Sudamérica han irrumpido con fuerza e indiscutible liderazgo en la adopción del dinero digital, ya sea apostando por las monedas digitales emitidas y respaldadas por un banco central (CBDC) o por las monedas virtuales descentralizadas (DEFI), lideradas por Bitcoin y Ether. El objetivo del artículo es identificar las razones que llevan a un país o zona monetaria a decantarse por alguno de estos sistemas. Una vez estudiadas las ventajas y desventajas del uso de las divisas virtuales centraremos el análisis en doce variables sobre el uso de dinero móvil extraídas del GFI (Global Findex Indicator) de los años 2011, 2014, 2017 y 2021 de todos estos países. El presente artículo demuestra, entre otras cuestiones, que la apuesta por un dinero digital basado en CBDC o DEFI depende más de la elección política de los dirigentes del país en cuestión que de criterios socioeconómicos.
Relatively narcissistic people are attracted to cryptocurrencies, though it is unclear whether they are differentially attracted to cryptocurrencies over other investments. Furthermore, theoretically, only narcissistic admiration, rather than narcissistic rivalry, would be expected to associate with attitudes toward cryptocurrencies. Intelligence and financial literacy are also proposed individual difference predictors of attitudes toward investments. Consequently, we administered measures of narcissistic admiration and rivalry, a financial literacy test, and a battery of intelligence tests to a sample of young adults (N = 372). Based on a structural equation model, narcissistic admiration and narcissistic rivalry differentially predicted attitudes toward cryptocurrencies (admiration, positively; rivalry, negatively), but both failed to associate significantly with attitudes toward stocks. Furthermore, financial literacy was a unique, positive predictor of attitudes toward stocks, whereas intelligence was a unique, negative predictor of attitudes toward cryptocurrencies. Our findings support the notion that narcissism is differentially associated with attitudes toward cryptocurrencies, though only narcissistic admiration (positively), consistent with the hypersensitivities to reward theory. Finally, higher levels of intelligence, controlling for financial literacy and narcissism, associated negatively with attitudes toward cryptocurrencies, perhaps due to the influence of scepticism.
Since 2016, the Bank of Canada has conducted annual surveys to monitor awareness, adoption and usage of Bitcoin and other cryptocurrencies. This report incorporates results from the 2019 Bitcoin Omnibus Survey and the November 2020 Cash Alternative Survey. We find that between 2018 and 2020, the level of Bitcoin awareness and ownership among Canadians remained stable: nearly 90% of the population were aware of Bitcoin, while only 5% owned it. We find that about half of Bitcoin owners stated they usually obtained their bitcoins through mobile or web exchanges, while one-fifth used mining. Bitcoin owners were susceptible to certain risks, as evidenced by the fact that about half of current and past owners stated they had been affected by events such as price crashes, losing access to funds, scams or data breaches. The most commonly cited reasons for owning Bitcoin were related to its use for investment or based on interest in the technology. Bitcoin owners displayed greater knowledge about the Bitcoin network than nonowners, yet they scored lower on questions testing financial literacy.
Alexander Suriadi, Andreas Dongan Wibawa, Setiani Putri Hendratno
Investment is a financial activity known by many people. With the advance of technology, people can now invest in digital currency. The purpose of this study is we would like to know the factors affecting mental accounting. Whether financial literacy, investment decision, and overconfidence affect mental accounting regarding investment activities in cryptocurrency. To do this, we use a quantitative method with six-point Likert scale questionnaires as a measurement to collect samples. The questionnaires are shared with individuals from different regions that have or do not have an experience in investing activities. In addition, the demographic is further categorized into age, gender, and education level. We got 279 samples, mainly from Southeast Asia and a few from East Asia, Europe, and North America. The data will be processed using SEM-PLS software to conduct the result. The finding implies that investing in cryptocurrency is strongly affected by the investor’s behaviour, such as mental accounting. Overconfidence is a significant factor contributing to investors’ mental accounting and investment decisions, while financial literacy is only associated with decision-making and not related to mental accounting.
Purpose The existing literature offers various perspectives on integrating cryptocurrencies into investment portfolios; yet, there is a gap in understanding the behaviours, attitudes and cross-investment links of individual investors. This study, grounded in the modern portfolio theory and the random walk theory, aims to add empirical insights that are specific to the UK context. It explores four hypotheses related to the influence of socio-demographics, digital adoption, cross-investment behaviours and financial attitudes on cryptocurrency owners. Design/methodology/approach This study uses a logistic regression model with secondary data from the Financial Lives Survey 2020 to assess the factors impacting cryptocurrency ownership. A total of 29 variables are used, categorized into four groups aligned with the hypotheses. Additionally, hierarchical clustering analysis was conducted to further explore the cross-investment links. Findings The study reveals a significant lack of diversification among UK cryptocurrency investors, a pronounced inclination towards high-risk investments such as peer-to-peer lending and crowdfunding, and parallels with gambling behaviours, including financial dissatisfaction and a propensity for risk-taking. It highlights the influence of demographic traits, risk tolerance, technological literacy and emotional attitudes on cryptocurrency investment decisions. Originality/value This study provides valuable insights into cryptocurrency regulation and retail investor protection, underscoring the necessity for tailored financial education and a holistic regulatory approach for investment products with comparable risk levels, with the aim of minimizing regulatory arbitrage. It significantly enhances our understanding of the unique dynamics of cryptocurrency investments within the evolving financial landscape.