A new study co-authored by Michigan Law Professor Vic Khanna illuminates the reasons individuals decide to invest in cryptocurrency, and it answers related questions that may be useful for policymakers.
Khanna, the William W. Cook Professor of Law, led the study. It is the largest academic survey to date on US attitudes toward cryptocurrency—digital-only financial assets such as bitcoin and ethereum that are based on an open-source technology called blockchain.
“In cryptocurrency, we have an area with a lot of start-up activity and many concerns with what it’s being used for—but also the potential for the underlying technology to be useful in other areas,” Khanna said.
“We thought it could be valuable to try to figure out what is leading people to be willing to invest in this asset class that has so many different moving parts. If we understand what motivates people to invest, then we may be in a better position to think about how to regulate it.”
The Survey Research Center at U-M’s Institute for Social Research partnered with Khanna and his co-authors to conduct the study from November 2022 to April 2023. The effort surveyed a nationally representative sample of American households and obtained completed responses from 1,774 households, including those who owned crypto assets, those who were potentially interested, and those who were not interested.
Survey Highlights
Almost 30 percent of respondents either owned or expressed an interest in owning cryptocurrency.
Among cryptocurrency owners, the top reasons for buying included advice from social media, friends, and family; and an interest in investing in new technology.
A lack of known uses for crypto assets was a significant deterrent to people investing in it.
Other barriers to owning crypto included a lack of knowledge, the absence of government regulation, and fears of scams or other risks not related to price.
While 91 percent of respondents had heard of bitcoin, 94 percent had not heard of the blockchain technology that underlies all cryptocurrencies.
Who is most interested in owning crypto?
In addition, the study identified a number of differences between early adopters of crypto and later adopters. For example, early adopters were much less concerned with regulatory issues than later adopters.
Early adopters were more likely than late adopters to be white, financially literate, and less trusting in US institutions. Politically, they were more likely to lean Independent or Republican. Both early and late adopters tended to be young, male, financially well off, and active users of social media.
Khanna said the relatively high interest in owning cryptocurrency is notable: “The level of interest in crypto ownership was relatively high—at a time when you might think it might be at its lowest, right after the big FTX scandal,” when the survey was taken.
“The number of people who owned it was in the range of what we expected, but the number who were crypto curious was fairly large,” Khanna said. “That suggests that there’s a significant amount of interest in this area.”
Concerns about crypto
Although a lack of regulation was a source of some hesitancy to invest in cryptocurrency, respondents were less clear on what they would like that regulation to look like, Khanna said.
A major issue that arose in the survey is current and potential uses for cryptocurrencies. While the technology is sometimes used for fraud and other illegal activities, it has legitimate uses as well, such as making international payments.
“Especially in the crypto-curious crowd—the ones who hadn’t already invested but were thinking about it—one thing that seemed very important to them was understanding the use cases,” Khanna said. “Everyone’s trying to get a sense of what use this can be put to.
“The one use that the industry currently focuses on the most is cross-border payments. Banks charge a lot of fees for cross-border payments, and it also takes time. With crypto, you can do cross-border payments pretty quickly and with very low fees.”
The study’s organizers are preparing to post the results online and circulate their draft paper—which they intend to publish—to stakeholders interested in regulatory issues. Khanna expects some government action on cryptocurrency regulation later this year.
“How does one think about regulating crypto? One useful information point is the people in the market: How are they responding? What motivates them? What are their concerns?” Khanna asked. “That’s something our paper really gets at.”