(iPoster) The Promotion of Cryptocurrencies: State Responses to Digital Asset Adoption

• In Event: Poster Session: International Political Economy II

Abstract

The scholarship on cryptocurrencies is at an early stage which is understandable given the relatively recent emergence of these new technologies. However, the research which has been published tends to either focus on issues surrounding money laundering (Foley, Karlsen and Putniņš 2019) or economic indicators such as forward inflation expectation rates (Blau, Griffith and Whitby 2021), capital flows (Makarov and Schoar 2020) or the very nature of cryptocurrencies as a store of value, currency or speculative asset (Baur, Hong and Lee 2018). Ba and Şen’s (2024) recent work takes as point of departure examining political variables (e.g., democracy performance and rule of law) associated with cryptocurrency. The recent pronouncement of the incoming Trump administration that it intends to make the United States a leader in the promotion of cryptocurrency (going so far to declare the possible creation of a federal bitcoin reserve) calls into question the relationship of the state to digital assets and the logic behind why some states promote cryptocurrencies while others ban. The promotion of cryptocurrencies is heavily influenced by the regulatory environment, and in this paper, I examine various country policies for the promotion of digital assets. I examine several variables associated with cryptocurrency promotion including the legal framework involving money laundering (know your customer regulations and the recently implemented EU Markets in Crypto-Assets regulation) and the treatment of the asset (whether as a stock or commodity) taxation policies (both at the corporate and individual level involving tax incentives and capital gains calculations) and ultimately adoption as legal tender (with El Salvador and the Central African Republic, until 2023, as the best exemplars). This paper explores how states encourage cryptocurrency adoption and whether such state policies result in actual cryptocurrency penetration in the market.

Author

• Steven D. Roper, Florida Atlantic University