Who Adopts Crypto Assets in Japan? Evidence from the 2019 Financial Literacy Survey

The adoption of crypto assets has been of great concern to policymakers ever since Facebook announced its proposed cryptocurrency, Libra, in mid-2019. Behind this concern lies the possibility of widespread Libra adoption for day-to-day transactions, bringing with it a set of serious risks related to money laundering, illicit financing, and consumer and investor protection. This study aims to investigate the demographic characteristics, financial literacy, financial behavior, three risky asset holdings, and the use of noncash payment methods among Japanese crypto asset adopters. To achieve these aims, probit models and multinomial logit models are applied. We find that Japanese crypto asset owners are more likely to be young and male and to have lower educational levels than non-owners. This is consistent with previous studies. The average relationship between crypto asset ownership and level of objective financial literacy is not found to be statistically significant; however, crypto asset owners' degree of understanding of crypto assets is associated with their level of objective financial literacy. Owners who indicate that they understand crypto assets to some extent tend to have better objective financial literacy, while owners who indicate that they do not understand crypto assets tend to have a lower level of objective financial literacy. A better understanding of crypto assets is also positively associated with earning profits from investing in them; however, objective financial literacy is not related to profiting from investment in crypto assets. Our results suggest that, in predicting the performance of an investment in crypto assets, specific knowledge of crypto assets is more important than objective financial literacy that captures general financial knowledge. Other notable findings of the study include the fact that crypto asset owners obtain information about economy and finance from mass media more frequently; that they are more experienced with financial troubles, such as bank transfer fraud or multiple debts; and that they are less credit card literate than non-owners, on average. They tend also to be more myopic, subject to herding, lacking in self-control, over-confident in their financial literacy, and less loss-averse than non-owners. Crypto asset owners' demographic characteristics are similar to those of the individuals who have experience investing in stocks, investment trusts, and foreign currency denominated money market funds. They are also demographically similar to those who use both crypto assets and one of the four payment methods?credit cards, electronic money, debit cards, and mobile payments via smartphones?rather than crypto assets alone.