Crypto-asset market development: the role of country's institutional quality

PurposeCrypto-asset can be traded on many different exchanges worldwide with servers located in countries with different financial characteristics and institutional surroundings. Trading volume on these servers varies considerably regarding the server's location, even though the prices do not differ greatly. Crypto-asset markets are poorly regulated and, as such, may leave a place for potential fraudulent activities and be linked to corruption. This paper aims to examine the role of country's institutions in attracting Bitcoin traders. Design/methodology/approachAssuming heterogeneity between countries where crypto-asset exchange servers are located, the Pool Mean Group Estimator is used. FindingsResults indicate that, from institutional variables, corruption in the country attracts while internal and external conflicts repel investors. Additionally, the growth of global uncertainty and the decline in the local stock markets motivate investors to trade Bitcoin. Originality/valuePrevious research has empirically proved the importance of institutions' quality for financial market development. This paper goes one step further and tries to empirically confirm the theoretical assumptions and investigate in detail the role of institutions in choosing servers in a particular country for Bitcoin trading.