The Genesis of the Crypto-economy: Application of the Institutional Theory

Abstract

The article marks a transformative shift from traditional economic institutions to technologically driven ones. This study explores the institutionalization of the crypto-economy through the lens of institutional theory, examining the roles of regulatory, cognitive and normative pillars. Our findings indicate that these institutional pillars significantly influence the development of the crypto-economy. Specifically, the regulatory pillar mediates the relationship between the social pillar and the crypto-economy, highlighting the indirect but substantial impact of a country’s social framework on crypto-economic growth. We refer to the cognitive and normative pillars collectively as the social pillars. Technological advancements and the rise of blockchain technology have spurred the growth of innovative fintech organizations, creating profitable investment opportunities and addressing cross-industry challenges such as data security and transparency. Although existing literature primarily focuses on micro-level drivers, it is crucial to conduct macro-level analysis to understand the broader institutional factors that support the development of the crypto-economy, as micro-level insights alone do not adequately capture macro-level growth dynamics. As a result, our research employs path analysis using global institutional indicators, demonstrating that the cognitive and normative institutional pillars significantly influence the regulatory pillar, which in turn affects the crypto-economy. These findings suggest that countries with robust institutional frameworks are better positioned to adopt and benefit from crypto-economic technologies. Furthermore, understanding these macro-level factors can guide policymakers in less absorptive countries to stimulate regulatory institutions that support the crypto-economy. This institutional perspective is crucial for identifying future leaders and laggards in crypto-economic development and for understanding inter-country differences in crypto-economy adoption. In conclusion, the study underscores the importance of a supportive institutional framework for the development and adoption of the crypto-economy, emphasizing the interconnected growth of fintech technology and the need for empirical research to address broader developmental issues.