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Crypto-asset market development: the role of country’s institutional quality

Author

Listed:
  • Blanka Škrabić Perić
  • Ana Rimac Smiljanić
  • Ivana Jerković

Abstract

Purpose - Crypto-asset can be traded on many different exchanges worldwide with servers located in countries with different financial characteristics and institutional surroundings. Trading volume on these servers varies considerably regarding the server’s location, even though the prices do not differ greatly. Crypto-asset markets are poorly regulated and, as such, may leave a place for potential fraudulent activities and be linked to corruption. This paper aims to examine the role of country’s institutions in attracting Bitcoin traders. Design/methodology/approach - Assuming heterogeneity between countries where crypto-asset exchange servers are located, the Pool Mean Group Estimator is used. Findings - Results indicate that, from institutional variables, corruption in the country attracts while internal and external conflicts repel investors. Additionally, the growth of global uncertainty and the decline in the local stock markets motivate investors to trade Bitcoin. Originality/value - Previous research has empirically proved the importance of institutions’ quality for financial market development. This paper goes one step further and tries to empirically confirm the theoretical assumptions and investigate in detail the role of institutions in choosing servers in a particular country for Bitcoin trading.

Suggested Citation

  • Blanka Škrabić Perić & Ana Rimac Smiljanić & Ivana Jerković, 2023. "Crypto-asset market development: the role of country’s institutional quality," Journal of Money Laundering Control, Emerald Group Publishing Limited, vol. 26(6), pages 1221-1236, June.
    • Handle: RePEc:eme:jmlcpp:jmlc-02-2023-0038
    DOI: 10.1108/JMLC-02-2023-0038
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    More about this item

    Keywords

    Bitcoin volume; Institution quality; Crypto-asset exchanges; Heterogeneous panel data; Crypto-asset market; C23; G23; N4;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • N4 - Economic History - - Government, War, Law, International Relations, and Regulation

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