Financial literacy and cryptocurrency participation

Abstract

After the circulation of first bitcoin and following numerous blockchain based cryptocurrencies, they have gained popularity in recent years. Moreover, they have been considered as breakthrough financial instruments enabling low transfer cost, anonymity and lack of central control. Beyond the conventional financial products and services, cryptocurrencies rely on a different technological infrastructure. This research aims to investigate the relationship between cryptocurrency participation and financial literacy including knowledge of both conventional financial instruments and cryptocurrencies. In this study, the work of van Rooji, Lusardi and Alessie (2011) regarding financial literacy and stock market participation was extended and different question sets were designed to measure financial literacy and cryptocurrency literacy levels. Furthermore, in order to ensure robustness, financial literacy and cryptocurrency literacy levels were analyzed in terms of different cryptocurrency participation types which are historical ownership, performing cryptocurrency mining or minting, current ownership and future ownership intention. The data is collected from 330 respondents through an online survey and the findings present that there is a relation between financial literacy and cryptocurrency participation as financial literacy levels increase, participation also increases. Similarly, there is a strong relationship between cryptocurrency literacy and cryptocurrency participation. The results and implications obtained from this research will be of considerable interest to service, platform and crypto asset providers in cryptocurrency ecosystem in terms of enhancement of the market.