Date of Award

Spring 2021

Document Type

Open Access Dissertation


Moore School of Business

First Advisor

Allen Berger

Second Advisor

Liang Ma


Cryptofinance is a term that describes the application of Bitcoin, cryptocurrencies, and blockchain technology to the traditional domains of finance; this includes both asset pricing and corporate finance. This work first documents the new technology, peer-to-peer financial instruments and how they trade, evaluates the small but growing literature in finance and economics, and then explores important relationships that explain cross-country differences in cryptocurrency premiums. The first finding is that investors pay a persistent premium over global prices in countries with less economic freedom, particularly when there exist barriers to trade, less secure property rights, or foreign exchange and capital controls limiting investment freedom. Using the Heritage Foundation’s Economic Freedom Indices, I find that a one standard deviation increase in the composite index leads to a 8.1% decrease in premiums. Three channels dominate: (1) there is higher demand for cryptocurrencies where there is lack of economic opportunity, (2) binding frictions such as capital and financial controls drive prices higher, and (3) jurisdictional risk hedging plays a significant role. Next, I investigate the effects of banking system access, stability, and access to credit on cross-country differences in cryptocurrency premiums. Physical access to banking services, as measured in ATM and bank branch density, is negatively related to premiums. A one standard deviation increase in both ATM and bank branch density results in 5.2% and 5.3% lower premiums, respectively (against average premiums of 7.0%, so the effects are large in economic magnitude). Premiums are persistently higher in countries with fewer creditor and borrower legal rights (a one standard deviation increase in legal rights is related to 2.7% lower premiums), a higher composition of nonperforming loans in their banking systems (5.8% higher premiums for a one standard deviation increase), and with lower ratios of liquid assets to deposits in their banking system. Taken together, these results indicate that part of cryptocurrency adoption around the world is related to substituting for inadequately provided financial services, and for hedging against banking system instability.