Public Disclosure Authorized

Policy Research Working Paper 9962

Public Disclosure Authorized

Crypto-Assets Activity around the World

Evolution and Macro-Financial Drivers

Erik Feyen
Yusaku Kawashima
Public Disclosure Authorized

Raunak Mittal
Public Disclosure Authorized

Finance, Competitiveness and Innovation Global Practice &

Information and Technology Solution Vice Presidency
March 2022
Policy Research Working Paper 9962

Abstract
On-chain crypto-assets transaction volumes have grown technology adoption and higher reliance on remittances.
rapidly, particularly during the COVID-19 pandemic. Taken together, the findings shed new light on the drivers
Crypto-assets activity appears to be a global phenom- behind crypto activity and offer support to the notions that
enon, although it still remains modest relative to gross crypto-assets are perceived as a risk asset, a potential macro
domestic product for most countries. Panel regressions hedge, and a potential tool to support cross-border transac-
across more than 130 countries show that the variation tions. However, the results come with caveats: a significant
in countries’ monthly crypto volumes is mostly driven portion of the sample period includes extraordinarily loose
by globally relevant factors such as real U.S. longer-term global financial conditions; the crypto volume data have
inflation expectations, U.S. real Treasury yields, and gold a short history, rely on important limiting assumptions,
and crypto-asset prices, rather than recent country-level and do not represent all crypto activity; and crypto-assets
macroeconomic developments. Cross-sectional regressions represent a fast-evolving, increasingly diverse asset class and
offer tentative evidence that crypto activity is higher in industry.
countries with higher information and communications

This paper is a product of the Finance, Competitiveness and Innovation Global Practice and the Information and
Technology Solution Vice Presidency. It is part of a larger effort by the World Bank to provide open access to its research
and make a contribution to development policy discussions around the world. Policy Research Working Papers are
also posted on the Web at http://www.worldbank.org/prwp. The authors may be contacted at [email protected],
[email protected], and [email protected].

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development
issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the
names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those
of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and
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 Crypto-Assets Activity around the World:
Evolution and Macro-Financial Drivers

Erik Feyen, Yusaku Kawashima, and Raunak Mittal1

JEL classification: E42, F24, F38, G11, G12, G15, G28, O33
Keywords: crypto-assets, digital assets, virtual assets, digital currencies, cryptocurrencies, crypto,
stablecoins, blockchain, distributed ledger technology, Bitcoin, Ethereum, stablecoins, medium of
exchange, payments, remittances, inflation, depreciation, global financial conditions, store of
value

1
All authors are with the World Bank. We thank Rachel Alexandra Halsema, Ani Popiashvili, and Hamed Honari for
significant contributions. We appreciate comments and suggestions from Raphael Auer, Parma Bains, Uzma Khalil,
Stela Mocan, Martin Melecky, Alvaro Enrique Pedraza Morales, Cedric Mousset, Uli Ruch, Jean Pesme, Nobu
Sugimoto, Mahesh Uttamchandani, Jeanne Verrier, William Zhang, and Peter Zhou. We thank Kim Grauer for
discussions and the crypto-assets transaction volume data. This paper’s findings, interpretations and conclusions are
entirely those of the authors and do not necessarily represent the views of the World Bank Group, their Executive
Directors, or the countries they represent.
1 Introduction
Notwithstanding their significant volatility, crypto-assets present both potential opportunities and
risks and are increasingly regarded as an emerging asset class by both financial market participants
and policy makers, reaching over US$2.8 trillion in market capitalization in November 2021 as
both retail and institutional adoption surged (Figure 1). The main objective of this paper is to
document the rapid rise in “on-chain” 2 crypto-assets activity around the world -- transactions that
are directly recorded on the distributed ledger that underpins a crypto-asset -- and empirically
investigate key macroeconomic drivers of crypto-assets volumes to better understand the drivers
behind their use. In the context of rapid growth and evolution of this space, understanding these
drivers is important for policy makers, end-users, and industry alike. As crypto-assets are currently
not widely used as a means of payment or to access decentralized financial services, 3 this paper’s
research questions focus on two common hypotheses: Are crypto-assets used as a risk asset? Do
users across countries perceive them as an emerging hedge against adverse macroeconomic
conditions such as high inflation or currency depreciation? We also briefly explore which country
characteristics are associated with crypto activity.

While there is no commonly agreed lexicon, 4 crypto-assets can be broadly defined as private
digital representations of value that can be used for payment or investment purposes or to access
a good or service and rely on distributed ledger or similar technology (e.g., Financial Stability
Board (2018a), Financial Action Task Force (2021), Basel Committee on Banking Supervision
(2021)). 5 More specifically, crypto-assets typically operate on open, decentralized computer
networks which aim to maintain an immutable distributed ledger that enables users to store,
transfer, and receive funds 24/7 with global reach and relatively fast settlement in a purely peer-
to-peer fashion without the need for intermediaries (i.e., “permissionless”) or the potential of third-
party interference (i.e., “censorship resistance”). The open-source software protocols enforced by

2
Not all crypto-assets transactions are “on chain”. “Off-chain” transactions are only recorded on centralized ledgers
and private order books of intermediaries such as crypto-assets exchanges, custodial wallets, and financial institutions.
These “off-chain” transactions may involve buying or selling of crypto-assets in exchange for fiat currency or
exchanging one crypto-asset for another.
3
However, Graf von Luckner et al (2021) find evidence that about 7 percent of “off chain” bitcoin transactions on a
large crypto exchange reflect domestic and international payments.
4
Several other terms are often used by standard-setting bodies, national authorities, academia, and industry, often with
slightly different connotations or emphases. These include “crypto currencies”, virtual currencies”, “digital
currencies”, “virtual assets”, “digital assets”, “crypto coins”, or simply “crypto”.
5
The definition of crypto-assets excludes e-money, central bank digital currencies (CBDCs), and digital
representations of traditional financial instruments.

2
these decentralized networks allow for consensus formation about the “state of the world” 6 in low-
trust environments without requiring a trusted third party and seek to imbue crypto-assets with
certain characteristics such as scarcity, verifiability, and, more broadly, programmability (e.g.,
Nakamoto (2008) and Buterin (2013)). 7

In response to the volatility of crypto-assets, stablecoins have emerged as a new type of crypto-
asset which aims to maintain a stable value relative to a specified asset (typically a fiat currency
and most commonly the US dollar), or a pool or basket of assets. Stablecoins have grown
explosively with a market capitalization of US$136 billion in November 2021, up from US$28
billion in January 2021, according to The Block. The three largest stablecoins, Tether, USD Coin,
and Binance USD, account for about 85 percent of the total. Furthermore, Decentralized Finance
(DeFi) has also grown swiftly, a “smart contract” 8-based crypto-assets financial ecosystem that
uses programmability features, spanning, among others, collateralized lending, borrowing,
exchange, stablecoins, investment management, and derivatives services (e.g., Harvey et al (2021),
JP Morgan (2021a), Schar (2021)). These services are interoperable and can be used as building
blocks by users or developers allowing for complex ecosystems to emerge (i.e., “composability”).
According to CoinMarketCap, in November 2021, a total of about US$190 billion was locked in
DeFi projects, up from about US$20 billion in January 2021. An important driver of this explosive
growth is the recent price surge in ether. Ethereum is the dominant DeFi platform, although its
share has been falling as rival platforms gain momentum.

While data gaps remain significant (e.g., IMF (2021)), it appears that crypto-assets activity is a
global phenomenon. Some industry estimates claim that over 200 million people around the world
own or use crypto-assets in 2021 (Figure 1). While its representativeness is not fully clear, a global
Statista household survey conducted in 2020 found that there are at least 20 countries where over
10 percent of the respondents own or use crypto-assets (Table 1). According to industry analysis,
global crypto-assets activity has grown by over 2,300 percent since Q3 2019 and over 881 percent
to Q3 2021 and estimates suggest that the countries with relatively high activity are Emerging
Market and Developing Economies (EMDEs) (Chainalysis (2021) and Table 1).

6
For example, the ownership status of all bitcoins on the Bitcoin ledger or the status of all smart contracts on
Ethereum.
7
The benefits of decentralization come at a cost, typically by posing trade-offs with throughput capacity and/or
security.
8
A “smart contract” is a piece of software that directly controls crypto-assets (also see Szabo (1997)). A smart contract
runs on a distributed ledger technology network and can be created by anyone.

3
The data used in this paper suggest that total on-chain transaction volumes reached US$2.8 trillion
in the first half of 2021 alone. In comparison, industry data indicate that total volumes, which
include “off-chain” transactions, were approximately US$16 trillion during the same period
(CryptoCompare (2021)). Off-chain transactions are facilitated by intermediaries such as crypto-
exchanges and are only registered on private ledgers and order books rather than the distributed
ledgers that underpin crypto-assets. As such, it is important to keep in mind that the on-chain
activity we study in this paper is not fully representative of all crypto-assets activity.

A limited, but growing number of institutions such as corporations, asset managers, and pension
funds around the world have started to invest in crypto-assets, bitcoin in particular. 9 Crypto-asset
derivatives and futures markets have grown rapidly, and spot- and futures-based exchange-traded
products are already active in various countries. Several large international banks, payment card
companies, and payment processors have started to offer crypto-asset wallets and related services.
And new services have appeared such as crypto-asset-based lending (i.e., on a collateralized basis),
borrowing, trading, asset management, and custody solutions, including by asset management
companies and large banks which have expressed a desire to become more involved in the crypto-
assets space (GFMA, et al (2021)).

The ascent of crypto-assets has put a welcome spotlight on various well-known weaknesses in the
traditional financial and monetary system. Some of these deficiencies are related to: financial
inclusion, since 1.7 billion people around the world remain “unbanked” and have limited or no
access to financial services (Demirgüç-Kunt et al (2017)); (cross-border) payments and
remittances, which can be slow, costly, and opaque; citizen’s trust in and efficiency of traditional
financial intermediaries, as in some countries competition is limited and memories of banking
sector stress are still fresh; and macroeconomic policies, given that some countries experience
regular bouts of excessive inflation and currency depreciation or volatility. Indeed, crypto activity
has risen in various countries that have experienced sharp and persistent declines in
macroeconomic conditions. Moreover, given their ease of storage and portability without the need
for intermediaries, crypto-assets may also support people “living under the threat of harm by their
families, people in their communities, or repressive governments” (Peirce (2021)). More broadly,
crypto-assets typically operate on open platforms and open-source software protocols which are

9
According to Coingecko.com, in November 2021, over 25 public companies around the world, many of them in the
crypto industry, collectively held more than US$13.6 billion in bitcoin on their balance sheets.

4
not controlled by a central entity which may be prone to failure, fraud or rent seeking and are
accessible to anybody to use and build upon. Proponents argue that most of the value of open and
decentralized systems accrues to participants and innovators, unlike centralized platform
companies which tend to become extractive with users and competitive with developers and
businesses as they reach scale (e.g., Dixon (2018)). Such conditions may therefore solicit more
enduring innovation and network effects and give rise to a new wave of interoperable business
models, products, and services. These innovations are not necessarily of a financial nature. For
example, distributed ledgers can be used to create a decentralized system for digital identification
where users have control and ownership over their own credentials, not third parties (e.g.,
Microsoft’s ION project on Bitcoin).

However, the nascent crypto-assets industry also poses various serious challenges and risks. For
example, the G20 concluded that crypto-assets “…raise issues with respect to consumer and
investor protection, market integrity, tax evasion, money laundering and terrorist financing.
Crypto-assets lack the key attributes of sovereign currencies. At some point they could have
financial stability implications.” (G20, 2018). Recently, IMF (2021) re-emphasized financial and
monetary stability considerations. The G7 concluded that stablecoins can pose legal, regulatory,
and oversight challenges including issues related to, among others, monetary sovereignty, data
privacy, cyber resilience, and fair competition (G7 (2019)). In light of their supra-national and
cross-border nature, crypto-assets present international regulatory arbitrage risks. Various
standard-setting bodies are closely monitoring developments and have issued guidance,
recommendations, and binding international rules and minimum requirements (see FSB (2018b)
for an early overview). More recent examples include the Financial Action Task Force’s (FATF)
revised standards and updated guidance for a risk-based approach regarding money laundering and
illicit finance of virtual assets and virtual asset service providers (e.g., FATF (2021)); the Basel
Committee on Banking Supervision’s consultative document on the prudential treatment of crypto-
assets (BCBS, 2020); the Financial Stability Board’s report on the regulation, supervision, and
oversight of stablecoin arrangements (FSB (2020)); and the joint report by the Committee on
Payments and Market Infrastructures (CPMI) and the International Organization of Securities
Commissions (IOSCO) on the applicability of the Principles for Financial Market Infrastructures
to stablecoin arrangements (CPMI-IOSCO (2021)). National authorities around the world have
taken very different stances towards crypto-assets: these range from supporting safe innovation

5
and adoption to limiting or banning certain crypto-assets activities – El Salvador has adopted
bitcoin as legal tender.

Understanding the main drivers behind crypto-assets usage is important for policy makers,
investors, and industry alike. Although Bitcoin, the original crypto-asset, was conceived as a peer-
to-peer electronic cash system without the need for a trusted third party such as a central bank or
financial intermediary, crypto-assets are currently not widely used as a medium of exchange,
although recent research finds evidence that bitcoin is used as a vehicle for domestic transactions
and international payments (e.g., Graf von Luckner et al (2021)). Moreover, crypto-assets users
may not be motivated by security concerns related to payments in cash or commercial banking
services, at least in advanced economies such as the United States (e.g., Auer and Tercero-Lucas
(2021)). And while growing quickly, DeFi is still nascent. We therefore explore two other often
discussed drivers behind crypto-assets activity in this paper: i) crypto-assets serve as a speculative
or risky investment vehicle (e.g., Baur, Lee and Hong (2018) and Athey, et al (2016)) and ii)
crypto-assets are perceived as an emerging “digital, scarce, speculative store of value” (Gensler
(2021)) which may act as a macro hedge providing protection against monetary and macro-
financial weaknesses such as excessive and persistent inflation (e.g., Blau et al (2021) and Conlon,
et al (2021)) and currency depreciation or volatility.

Our paper contributes to a small, but burgeoning literature which empirically investigates the
potential drivers and motivations of crypto-assets activity and usage in various ways. First, using
a rich monthly data set of on-chain crypto-assets transaction volume estimates at the country level,
we document the evolution of usage around the world and analyze both trends at the global level
and in EMDEs. Second, using panel regressions we empirically assess the association between
crypto-assets volumes and a country’s macro-financial fundamentals and relevant global financial
conditions. Third, we use cross-sectional regressions to take initial steps to identify other
potentially relevant country characteristics such as financial sector development and ICT adoption.

6
Figure 1: Crypto-assets: Market Capitalization, Prices, and Estimated Number of Users
Panel A: Market Cap for Bitcoin, Ether, Stablecoins, DeFi and Other Crypto-assets (in US$)

Panel B: Bitcoin and Ether Prices (US$ on log scale)

7
 Panel C: Estimated Global Crypto Users (in millions)

Sources: Messari; TradingView; Coinmetrics; Federal Reserve; Crypto.com. The estimated users figures should be
interpreted with caution as data gaps remain significant.

8
Table 1: Estimates of Crypto-assets Adoption
Panel A: Statista Global Country Survey: Share of Respondents who Indicated That They
Used or Owned Crypto-assets (2020)
%
Country Share (%) Country Share (%)
Nigeria 31.9 Lithuania 8.7
Vietnam 21.1 Egypt, Arab Rep. 8.3
Philippines 19.8 Norway 8.1
South Africa 17.8 Portugal 8.1
Thailand 17.6 Australia 7.8
Peru 16.1 Korea, Rep. 7.6
Turkey 16.1 Serbia 7.5
Colombia 15.3 Russian Federation 7.3
Argentina 14.4 Austria 7.2
Indonesia 13 Poland 7.2
Brazil 12.5 China 6.9
Malaysia 12.3 Hungary 6.4
Chile 11.7 Romania 6.4
Saudi Arabia 11.4 Belgium 6.3
Switzerland 11.1 United States 6.2
Greece 11.1 France 5.6
Kenya 10.5 Pakistan 5.6
Dominican Republic 10.3 Canada 5.2
Netherlands 10 Germany 5.2
United Arab Emirates 10 Finland 5.1
Mexico 9.7 New Zealand 5.1
Ireland 9.6 Israel 4.9
Singapore 9.6 United Kingdom 4.7
Spain 9.4 Italy 4.7
Morocco 9.3 Denmark 4.4
Czechia 9.2 Sweden 4.3
India 8.8 Japan 3.7
Source: Statista Global Consumer Survey.
Note: Statista reported that the survey contains between 1,000-4,000 respondents per country and that the samples are
representative of the online population. These figures should be interpreted with caution as data gaps remain
significant.

9
 Panel B: Chainalysis Top 20 Global Crypto-assets Adoption Index (2021)

Ranking for individual weighted metrics feeding

into Global Crypto Adoption Index
Index Overall index On-chain value On-chain retail P2P exchange
Country score ranking received value received trade volume
Vietnam 1.00 1 2 4 3
India 0.37 2 3 2 72
Pakistan 0.36 3 12 11 8
Ukraine 0.29 4 5 6 40
Kenya 0.28 5 28 41 1
Nigeria 0.26 6 10 15 18
Venezuela 0.25 7 22 29 6
United States 0.22 8 4 3 109
Togo 0.19 9 42 47 2
Argentina 0.19 10 17 14 33
Colombia 0.19 11 23 27 12
Thailand 0.17 12 11 7 76
China 0.16 13 1 1 155
Brazil 0.16 14 7 5 113
Philippines 0.16 15 9 10 80
South Africa 0.14 16 16 18 62
Ghana 0.14 17 37 32 10
Russian Federation 0.14 18 6 8 122
Tanzania 0.13 19 45 60 4
Afghanistan 0.13 20 38 53 7
Sources: Statista; Chainalysis.
Note: The panel shows the 2021 crypto adoption index calculated and published by Chainalysis. These figures should
be interpreted with caution as data gaps remain significant.

2 Literature
Drivers of crypto-assets usage

Szabo (2017) observes that economic transactions and exchanges require trust between
participants. However, trust does not scale well as the number of participants in a network grows,
thereby increasing transaction costs. As a result, historically, trust has been delegated to a central
authority which may be susceptible to failure, fraud or rent seeking. He then posits that the
technology which underpins crypto-assets can lower social transaction costs in low-trust
environments without the need to delegate trust to a central third party. As such, the technology
may enable more and more efficient economic interactions between large numbers of agents as

10
they do not need to trust each other or an intermediary (i.e., “social scalability”). Raskin, Saleh
and Yermack (2019) contend that non-state digital currencies could have important welfare
implications for emerging markets as they can provide for an alternative asset which could serve
as a check on the inflationary tendencies of the sovereign, suggesting that crypto-assets adoption
may be driven by a diversification opportunity for local investment. Regarding Decentralized
Finance (DeFi), Harvey et al. (2021) claim it has the best potential to provide financial services in
the future to overcome the inherent challenges of the traditional financial sector of centralized
control, limited access, inefficiency, opacity, and lack of inter-operability.

Early work that aims to identify drivers of crypto-assets adoption includes Hileman (2014) which
proposed a Bitcoin Market Potential Index based on seven country characteristics (technology
penetration, international remittances, inflation, size of informal economy, financial repression,
historical financial crises, and bitcoin penetration) and posited that the greatest potential for
adoption lies in Latin America and Sub-Saharan Africa. Additional relevant factors for crypto-
assets adoption may also include high expected returns from speculative investment and regulatory
arbitrage, particularly related to illicit financial activity (e.g., IMF (2021) and Saiedi, Brostrom &
Ruiz (2020)). Feyen, Frost, Natarajan, and Rice (2021) propose a set of supply and demand side
drivers of crypto-assets adoption with a focus on stablecoins. As supply side drivers they include
profitability and costs of traditional payment service providers, and the availability of
infrastructures such ICT and agent networks. On the demand side, they consider cost and
inconvenience, confidence in financial incumbents and the government, and macroeconomic
conditions.

There is a growing empirical literature that explores several of these drivers. Saiedi, Brostrom &
Ruiz (2020) find some evidence that perceived failings of the traditional financial system
contribute to the adoption of crypto-assets. However, using U.S. Survey of Consumer Payment
Choice data Auer and Tercero-Lucas (2021), document that crypto-asset adoption in the United
States is not driven by distrust in the regulated financial system and conclude that adoption is
mostly driven by speculation. In addition, they also find that crypto-assets users tend to be
educated, young, and digital natives. By analyzing on-chain Bitcoin transaction data, Baur, Lee
and Hong (2018) and Athey et al (2016) also find that bitcoin transactions mostly reflect
speculative activity. However, more recently Graf von Luckner et al (2021) study data from a
centralized exchange and challenge the view that Bitcoin is only used for speculation. They find
evidence that at least 7 percent of bitcoin transactions reflect its use for domestic transactions and

11
international payments. Athey et al (2016) also document that bitcoin ownership is highly
concentrated. Indeed, even as the popularity of Bitcoin has continued to grow in the past few years,
Marakov and Schoar (2021) more recently confirmed that bitcoin ownership and mining capacity
are still very concentrated. Auer and Claessens (2020) find that in light of significant regulatory
uncertainty, regulatory news regarding crypto-assets has had a significant impact on crypto-assets
market prices and trading volumes.

Box 1: Women and Crypto-assets Adoption

In their Global Report on Women and Cryptocurrencies, Spindler and Rodriguez (2021)
conducted a small survey of crypto-asset ownership and adoption factors among 60 women
from 31 countries, with a focus on residents of Latin America. 36% of participants in the
survey highlighted their interest in the underlying technology, while 14% saw crypto-assets
as a long-term investment vehicle. Participants cited a number of factors that increased their
interest in crypto-assets, including value fluctuations of their local fiat currency, domestic and
regional financial crises, lack of economic empowerment and control over finances within
their household, and perceived inefficiency of legacy financial systems. Importantly, 95% of
the women respondents had some form of higher education, signaling that educational
background could play a role in crypto-asset adoption.

Measuring crypto-assets activity

To understand the various motivations behind crypto-assets activity, it is important to properly

measure it. However, while open distributed ledgers allow anyone to observe the complete
historical on-chain transaction data, their pseudonymous nature makes it challenging in practice to
match individual persons or businesses to on-chain addresses, unless they, for example, underwent
Know-Your-Customer checks to obtain accounts at centralized intermediaries such as crypto-
exchanges.

Several studies have taken different approaches to measure crypto-assets activity. To estimate the
number of bitcoin and ether owners, Wang (2020, 2021) utilizes on-chain data to count the total
number of on-chain deposit addresses 10 which are required to deposit funds into crypto exchanges.
One of the heuristics used by Athey, et al (2016) to analyze Bitcoin activity is to associate multiple
Bitcoin addresses to user wallets. Estimating country-level activity is also challenging, as crypto-
assets networks are global with no on-chain information regarding the geographic origin or

10
Deposit addresses are temporary on-chain addresses of users transferring funds to crypto exchanges.

12
destination of transactions. Lischke and Fabian (2016) leverage publicly available Bitcoin
transaction data and the IP addresses of transactions to gauge geographical location. However, this
approach assumes that the Bitcoin node that broadcasts the transaction to the network is also its
source.

Crypto-assets prices and inflation

There is a small literature that studies the link between crypto-asset prices and inflation. Using a
vector-autoregressive framework, Blau et al (2021) find an empirical relationship between bitcoin
prices and inflation expectations suggesting that bitcoin acts as an inflation hedge (i.e., changes in
bitcoin Granger-cause changes in inflation expectations). Conlon et al (2021) confirm a link
between forward inflation expectations and bitcoin and ether prices, but this relationship is only
limited to the onset of COVID-19 casting doubt over the ability of these crypto-assets to hedge
expected inflation going forward.

3 Data
3.1 Description of the on-chain crypto-activity data set
We use a large global monthly country-panel of on-chain crypto-asset transaction volumes of value
sent in US dollars provided by Chainalysis, a global blockchain analysis company. “On-chain”
transactions are directly recorded on the distributed ledger that underpins a crypto-asset. The
sample spans the period April 2019 – June 2021 and covers 174 countries, 114 different crypto-
assets, and five transaction size categories. We have mapped crypto-assets into four groups: 1)
Bitcoin; 2) Ethereum; 3) Stablecoins 11; and 4) DeFi and Others. 12 We also group transaction sizes
into two categories: a) less than or equal to $10,000, which is more reflective of retail use and b)
greater than $10,000.

While on-chain crypto-assets transaction data are fully transparent for most crypto-assets, in light
of their pseudonymous nature, the destination country of a particular transaction may not be known

11
These include some of the major US$-linked stablecoins: USD Coin (USDC), Tether (USDT), DAI (crypto-assets
backed), TrueUSD (TUSD), Paxos USD (Dollar (PAX), Binance USD (BUSD), and Gemini Dollar (GUSD). In
November 2021, the top 3 stablecoins account for about 85 percent of the total stablecoin market capitalization.
12
This category includes 103 different crypto-assets. The top 10 with the largest volume are: Wrapped Ether (WETH),
XRP, Litecoin (LTC), Wrapped Bitcoin (WBTC), Chainlink (LINK), Bitcoin Cash (BCH), EOS, Uniswap (UNI),
Yearn Finance (YFI), and Sushiswap (SUSHI).

13
with certainty. To overcome this challenge, Chainalysis combines proprietary knowledge of
crypto-assets wallets ownership with web traffic data provided by SimilarWeb, a website analytics
& traffic intelligence platform, to provide estimates of the total on-chain value sent to countries
(in US dollar terms). Figure 2 provides an overview of the methodology. More specifically,
Chainalysis maps known on-chain addresses to services such as crypto-exchanges which can be
associated with many on-chain addresses. Next, Chainalysis allocates transaction volumes of a
service to a country in proportion to the web traffic that originates from that country to each
service’s website. To further improve classification, Chainalysis also accounts for time zones, fiat
currency pairs offered, website language options, and the location of the service’s headquarters.

These volume estimates come with important caveats. First, they do not capture “off-chain”
transactions which are recorded on the private order books of intermediaries such as crypto-
exchanges or financial institutions (with the exception of peer-to-peer exchanges such as Paxful).
As such, our data do not capture activities that are facilitated by such intermediaries which include
purchases of crypto-assets with fiat currency, sales of crypto-assets for fiat currency and swaps
between crypto-assets. Total off-chain volumes appear significantly larger than on-chain
transactions with some industry estimates suggesting the approximate ratio of off-chain to on-
chain volume being roughly 6:1. 13 Total off-chain volume in the first half of 2021 was
approximately US$16 trillion (CryptoCompare, 2021), compared to the on-chain volume of
US$2.8 trillion. Second, the web traffic data does not account for virtual private network (VPN)
activity which obscures the true destination of web traffic. Third, the transaction value associated
with a known crypto-exchange wallet is assumed to be proportionate the volume of web traffic, an
important limiting assumption.

13
Chainalysis estimate based on trade volume data from Kaiko and on-chain transaction data from Chainalysis.
https://blog.chainalysis.com/reports/fake-trade-volume-cryptocurrency-exchanges

14
Figure 2: Country-level Crypto-assets Activity Estimation Methodology

Source: Chainalysis.
Note: Example demonstrating Chainalysis’ methodology for estimating country-level crypto activity using crypto-
service platforms volume (in US$) and countries’ web traffic data.

3.2 Trends and patterns in on-chain crypto-assets volumes

Table 3 provides summary statistics of the crypto-assets activity data aggregated by type of crypto-
asset category and shows that the average transaction size for bitcoin and ether (US$57.9 mln and
US$38.5mln) are much higher in comparison to stablecoins, DeFi or other crypto-assets,
suggesting that activity is mainly driven by large and institutional players, rather than retail
consumers.

Next, we highlight several main trends and patterns in crypto-assets activity. The Annex contains
additional charts.

 Total volume has been increasing in the past two years, driven by ether and stablecoins.

15
Figure 3 Panel A shows a rapid rise of total crypto-assets activity over the past two years reaching
a total of US$2.82 trillion year to date in 2021. Across all transactions, the breakdown by type of
crypto-asset shows that the value sent in ether (40 % of overall volume 2021 year to date) and
stablecoins (24% of overall volume 2021 year to date) has gained more compared to bitcoin (24%
of overall volume 2021 year to date). DeFi and other crypto-assets activity represents 12% of
crypto activity year to date. The on-chain stablecoin activity (US$ 602 billion 2021 year to date)
is significantly less in comparison to total stablecoin transaction volumes (i.e., including off-chain
which is US$ 2.8 trillion 2021 year to date). 14 This indicates that a majority of stablecoin volume
is driven by intra exchange trade for settlement of crypto-asset trading.

Figure 3 Panel B shows a similar trend for volumes associated with smaller transaction sizes.
Stablecoin activity remain relatively low with 16% of overall volume year to date. When looking
at the crypto activity by transaction size, we find that while large value transfers ($2.69 trillion
year to date) dwarf smaller transaction size transfers ($119 billion year to date), the smaller
transaction size transfers have also been rising steadily in the past two years.

14
Estimate based on Coinmetric data.

16
Figure 3: Total Crypto-assets Volume by Type of Crypto-asset
US$
Panel A: All Transaction Sizes (in US$)

Panel B: Small Transaction Sizes (<US$10k)

Sources: Chainalysis; World Bank staff calculations.

17
 Crypto-assets activity is a global phenomenon, driven by Europe and Central Asia and North
America. Small transactions represent a minor fraction of total volumes, suggesting retail
participation is still relatively low.

Figure 4 suggests that the geographical distribution of crypto-assets activity is already global.
However, the majority of this activity is concentrated in North America (the United States in
particular) and Europe & Central Asia, with these two regions combined representing 56 percent
of overall activity aggregated over full sample period in all transaction sizes and 54 percent of
overall activity in smaller transaction sizes less than $10k. While developed and high-income
economies continue to represent a larger share of the overall crypto activity in absolute value
transfers across all transaction sizes, the proportion of activity is gaining higher momentum in
regions like East Asia Pacific, Latin America and the Caribbean, South Asia, and Sub-Saharan
Africa. Smaller transactions account for 7 percent of the overall volume for the full sample period.

18
Figure 4: Crypto-assets Volume by Region and Transaction Size
US$
Panel A: All Transaction Sizes by Region

Panel B: Small Transaction Sizes (<US$10k)

19
 Panel C: By Transaction Size

Sources: Chainalysis; World Bank staff calculations.

Figure 5 shows a map of crypto-assets activity scaled by a country’s GDP – larger bubbles indicate
higher activity relative to the size of the economy. Activity is relatively limited in lower- and
middle-income countries. Activity is dominated by bitcoin and ether (Panel A) and smaller
transactions still represent a small fraction of total volumes across countries (Panel B).

20
Figure 5: Total Crypto-assets Volume by Type of Crypto-asset and Transaction Size (April
2019-June 2021)
% of GDP
Panel A: By Type of Crypto-asset

21
 Panel B: By Transaction Size

Source: Chainalysis; IMF; World Bank staff calculations.

Note: The bubble sizes representing the relative values sent (% of GDP). Outliers were winsorized at the 99th
percentile.

 Relative to a country’s economic activity, volumes in Emerging Markets & Developing

Economies (EMDEs) are sizeable in some regions.

Figure 6 shows that the annualized total volumes of crypto-assets activity for 2021 relative to GDP
have become sizeable, particularly in regions like Latin America and the Caribbean (median:
0.07% of GDP), Sub-Saharan Africa (median: 0.06% of GDP) and Europe and Central Asia
(median: 0.10% of GDP). Some countries exhibit very high crypto-assets activity with volumes as
high as 0.68% of GDP in Europe and Central Asia. There is significant variation within regions,
particularly in Europe and Central Asia and Latin America and the Caribbean. The volumes
associated with smaller transactions are an order of magnitude smaller, even in the most active
region of Europe and Central Asia (median: 0.01% of GDP).

22
Figure 6: Annualized Crypto-assets Volume by Region in 2021
US$ (Percent of GDP)
Panel A: All Transaction Sizes Panel B: Small Transaction Sizes (<US$10k)

Source: Chainalysis; IMF World Economic Outlook; World Bank staff calculations.
Note: Annualized figures based on data for January – June 2021 and 2021 GDP projections. EAS = East Asia and Pacific; ECS = Europe and Central Asia; LCN = Latin
America and Caribbean; MEA = Middle East and North Africa; NAC = Northern America; SAS = South Asia, SSF = Sub-Saharan Africa.

23
3.3 Main independent variables: Macro-financial variables and other country
characteristics
Table 2 provides definitions and sources of the main independent variables used in our empirical
analysis. Table 3 and Table 4 provide summary statistics and correlation matrixes, respectively. In
addition to the crypto-asset data from Chainalysis, we use countries’ financial and macroeconomic
data from various sources. We focus on a parsimonious set of monthly indicators to ensure broad
country coverage. Our monthly indicators are derived from three data sets: 1) IMF’s International
Financial Statistics (e.g., country-month inflation and exchange rates); 2) IMF’s World Economic
Outlook (e.g., country-year nominal GDP); and 3) US Federal Reserve economic data for global
or U.S. asset prices, interest rates, risk appetite measures, and inflation expectations. The bitcoin
and ether data are sourced from Coinbase, a large U.S.-based crypto-assets exchange.

Our set of broader annual country-level variable include GDP per capita, financial development
indicators such as domestic bank credit to GDP, financial account ownership, remittances to GDP,
and ICT development indicators (e.g., mobile phone subscriptions and fixed broadband
subscriptions). We also include indicators on countries’ institutional frameworks proxied by
economic freedom indicators. These indicators are taken from the World Bank World
Development Indicators and the Heritage Foundation’s Economic Freedom Index, respectively.

4 Empirical approach
First, we start by running monthly panel regressions focusing on a set of country and global macro-
economic and financial factors with country-fixed effects. We do not include time-fixed effects
since we are studying the global macro-financial factors. Second, we run basic cross-sectional
regressions to explore the role of a broader set of annual variables. All estimations involve robust
standard errors clustered at the country level. In light of the relatively small size and impact of
crypto-assets activity on country and global macro-economic variables to date, we are not very
concerned about endogeneity challenges.

We exploit within-country variation by deploying panel regressions. Our main specification is:

𝐿𝐿𝐿𝐿(𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶)𝑗𝑗𝑗𝑗 = 𝛽𝛽0 + 𝛽𝛽1 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑗𝑗𝑗𝑗−1 + 𝛽𝛽2 𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝑡𝑡−1

+ 𝛽𝛽3 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑡𝑡 + 𝛾𝛾𝑗𝑗 + 𝜀𝜀𝑗𝑗𝑗𝑗 , (1)

24
where the dependent variable 𝐿𝐿𝐿𝐿(𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶)𝑗𝑗𝑗𝑗 represents the log of the monthly value of
crypto-assets transactions expressed in U.S. dollars for country j at time t -- note this is a flow
rather than a stock concept. We use lagged values of country and global factors as market
participants act according to the most recently available data which arrives with a lag in practice.

The 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑗𝑗𝑗𝑗−1 consists of a set of 1-month lagged macroeconomic variables for

𝑗𝑗𝑗𝑗−1 𝐶𝐶𝐶𝐶𝐶𝐶
country j at time t-1, including ∆𝐶𝐶𝐶𝐶𝐶𝐶𝑗𝑗𝑗𝑗−1 = − 1, the lagged monthly inflation rate percent
𝐶𝐶𝐶𝐶𝐶𝐶 𝑗𝑗𝑗𝑗−13

change based on a comparison to the same month in the previous year for country j at time t-1 and
𝐸𝐸𝐸𝐸𝐸𝐸ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅
∆𝐸𝐸𝐸𝐸𝐸𝐸ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑗𝑗𝑗𝑗−1 = 𝐸𝐸𝐸𝐸𝐸𝐸ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑗𝑗𝑗𝑗−1 − 1, the lagged month-on-month percent change in the
𝑗𝑗𝑗𝑗−2

exchange rate vis-à-vis the U.S. dollar (i.e. an increase signifies currency depreciation) for country
j at time t-1. If crypto-assets are perceived as a hedge against domestic macroeconomic weakness,
we expect crypto volume to exhibit a tendency to rise with a recent increase in domestic inflation
or currency depreciation if investors expect such trends to continue in the future. Ideally, we would
like to use measures that capture inflation expectations rather than realized inflation, but these
indicators are not available for a broad range of countries. In robustness checks, we use changes
in Broad Money instead of inflation, also calculated on a year-on-year basis.

The 𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝑡𝑡−1 comprise a parsimonious set of 1-month lagged indicators. We use

conditions in the U.S. as a proxy for global macro-financial conditions.

• Crypto-asset prices. We include month-on-month price changes for two key crypto-assets:
bitcoin and ether to explore the impact of prices on crypto volume. These price changes
are calculated analogously to ∆𝐸𝐸𝐸𝐸𝐸𝐸ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑗𝑗𝑗𝑗−1.
• Gold prices. Some major crypto-assets such as Bitcoin are perceived by some crypto-asset
investors as “digital gold” or “digital stores of value” with macro hedge properties.
Therefore, to explore the relationship with crypto volume and gauge whether the data bear
out whether they are (imperfect) substitutes, we include month-on-month gold price
changes.
• Risk appetite. We use the VIX index, a U.S. stock market-based measure of investor
uncertainty and risk aversion, as a proxy for global risk appetite. Higher values indicate
higher levels of risk aversion. When risk appetite is high, investors may be more interested
in risky investments such as crypto assets causing a rise crypto volume. The VIX index

25
 rose significantly at the onset of the COVID-19 pandemic. The VIX spiked in late March
2020 amid a broad-based erosion of confidence in financial markets and subsequently fell
on the back of massive policy support but remained volatile throughout the pandemic
(Figure 7). In robustness checks, we use the U.S. BBB corporate bond spread as an
alternative measure of risk appetite (higher values indicate higher risk aversion).
• United States longer-term inflation expectations. We focus on the longer-term inflation
outlook in the United States as a core relevant factor for financial markets and investors. If
crypto-assets are deemed to be a global macro hedge, crypto volume would increase if
inflation expectations increase. When inflation expectations are well-anchored, changes in
breakeven inflation may also reflect improvements in growth expectations and increased
risk appetite. We use the 5-year, 5-year Forward U.S. Inflation Expectation Rate, a widely
monitored market-implied proxy for longer-run inflation expectations. It is a measure of
the average expected inflation over the five-year period that begins five years from today
and is derived from yields on nominal and inflation-adjusted Treasury securities. On the
onset of the COVID-19 pandemic, the economic outlook deteriorated which caused
inflation expectations to fall dramatically (Figure 7). Inflation expectations recovered to
pre-pandemic levels due to massive economic and monetary stimulus. In robustness
checks, we instead use the U.S. 10-year Breakeven Inflation Rate, another widely used
proxy for inflation expectations which is similarly derived.
• Unites States real 10-year Treasury yields. 10-year U.S. Treasury yields are a widely
observed indicator in global markets as they reflect economic prospects and drive global
financial conditions. We use the yield on 10-year U.S. Treasury securities which are
indexed to inflation (TIPS). Higher rates are often associated with tighter global financial
conditions, producing cross-border spillover effects, including to EMDEs. During the onset
of the pandemic in March 2020, Treasury yields fell strongly as economic prospects
deteriorated and investors fled to safety. However, yields briefly spiked in late March as
investors turned to cash amid a wider erosion of market confidence and broad-based selling
of financial assets. Real 10-year yields turned negative in our sample period due to the
impact of the COVID-19 pandemic and the subsequent policy response which included
purchases of Treasury securities by the U.S. Federal Reserve which put downward pressure
on yields to support market functioning and lower longer-term interest rates to stimulate
the economy (i.e., quantitative easing) (Figure 7). Low or even negative (real) yields

26
 contribute to looser global financial conditions to stimulate the economy. They may also
lead to “search for yield” effects which tend to drive up asset prices and may induce more
risk taking. If crypto-assets are perceived as risk assets, crypto volumes would tend to rise
when real yields are low. It is important to keep in mind that asset purchases by the Federal
Reserve, including Treasury securities, took place during the sample period (e.g., to combat
the impact of the pandemic) which has influenced price formation and the signals that can
be extracted from it.

𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑡𝑡 is a dummy which assumes a value of one after March 2020 and zero
otherwise. This variable captures the broad and global impact of the pandemic on crypto-assets
including public health, behavioral, and economic impacts as well as the unprecedented monetary,
fiscal, and financial sector policy response.

Finally, 𝛾𝛾𝑗𝑗 represents country-fixed effects to account for time-invariant country characteristics
(e.g., level of economic development, institutional framework) that may drive differences of crypto
volume across countries. 𝜀𝜀𝑗𝑗𝑗𝑗 is the error term.

Second, we run cross-sectional OLS regressions on 2020 data to explore the role of financial
development, remittances, economic freedoms, and ICT factors to explain variation of crypto
volume across countries. Our main specification is:

𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶
𝐿𝐿𝐿𝐿( 𝐺𝐺𝐺𝐺𝐺𝐺
)𝑗𝑗 = 𝛽𝛽0 + 𝛽𝛽1 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝑗𝑗 + 𝛽𝛽2 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑗𝑗 +
𝛽𝛽3 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑗𝑗 + 𝛽𝛽3 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑗𝑗 + 𝛽𝛽4 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑗𝑗 + 𝜀𝜀𝑗𝑗 , (2)

𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶
Where the dependent variable Ln ( 𝐺𝐺𝐺𝐺𝐺𝐺
)𝑗𝑗 represents the log of the yearly value of crypto-

assets transactions as a fraction of a country’s nominal annual GDP for country j in 2020,
𝐿𝐿𝐿𝐿𝐿𝐿𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝑗𝑗 captures the general level of economic development,
𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑗𝑗 includes credit to private sector (% of GDP) and account ownership
(% of adult population) for country j; 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑗𝑗 is personal remittances received (as % of
GDP) for country j; 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑗𝑗 include economic freedom indexes such as Monetary
Freedom Index and Financial Freedom Index for country j; 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑗𝑗 is mobile cellular
subscriptions (per 100 people) and fixed broadband subscriptions (per 100 people) for country j;
𝜀𝜀𝑗𝑗 is the error term.

27
Figure 7: Selected Global Macro-Financial Factors

Source: U.S. Federal Reserve.

5 Results
This section presents the main empirical results of this paper. As indicated in the previous section,
our dependent variable is the log of monthly on-chain crypto-assets volume in a country, expressed
in U.S. dollars. Since we are interested in understanding crypto volume in EMDEs as well as for
retail users, we 1) fit our regressions on both the total sample (about 135 countries) and on a smaller
sample which only consists of EMDEs (i.e., about 85 countries that are not classified as High-
Income Countries) and 2) focus as the independent variable on volumes associated with all
transaction sizes and volumes for smaller transactions only (<US$10k).

Tables 5-8 offer the main results and robustness checks and are all structured similarly. Models 1-
5 are fit on the full country sample, whereas Models 6-10 are fit on EMDEs only. Tables 9 and 10
provide the results of extensions which investigate the role of country and global factors for across
four main crypto-asset groups separately: 1) bitcoin, 2) ether, 3) stablecoins, and 4 all crypto-assets
except stablecoins.

28
Because the panel regressions include country-fixed effects, all our results should be interpreted
as explaining the variation in country’s crypto volumes rather than their level, because the country-
fixed effects capture, for example, the fact that larger or economically more developed countries
exhibit higher volumes in general.

5.1 Main results: Panel regressions

Table 5 presents the main results for volumes of all transaction sizes for all crypto-assets. As
described earlier, the main dependent variable is the log country-month crypto-asset volumes
expressed in U.S. dollars. We find that across all specifications and for all countries and EMDEs
only, a set of lagged global (forward-looking) factors is robustly statistically significant at the 1-
percent level. Moreover, the coefficients are of similar magnitude in both country samples. In
contrast, we document that lagged country indicators which reflect recent domestic
macroeconomic developments explain little variation in crypto volumes. These country factors
lose statistical significance once global factors are accounted for. However, our full models suggest
that country-level currency depreciation is somewhat associated with higher crypto volume. Taken
together, these findings suggest that crypto volumes are mostly driven by global (forward-looking)
indicators -- which may ultimately shape domestic macro-financial conditions -- rather than recent
domestic macroeconomic developments.

The results for the global factors support the notion that crypto users may assign some global
hedging properties to crypto assets. A 10-basis-points increase in U.S. inflation expectations (on a
5-year, 5-year forward basis as embedded in U.S. Treasury yields) increases crypto volumes by
about 28 basis points. This finding holds in both advanced economies and EMDEs alike. Crypto
volumes also move in the opposite direction of gold prices, suggesting that crypto-assets are
perceived to some extent as a substitute for gold, a traditional global inflation hedge. A 1-percent
decline in lagged gold prices is associated with an increase in volumes of about 1.1 percent.

The global factor results further imply that crypto-assets are perceived as a “risk on” asset class.
Crypto volumes are higher when (inflation-adjusted) U.S. Treasury yields are lower as this
supports loose global financial conditions and induces investors to take on higher risks, including
investing in speculative instruments such as crypto assets: a 10-basis-point decline in yields is
associated with around a 5 basis-points increase in crypto volumes. Crypto volumes also appear to
be supported by a momentum effect in crypto-assets prices further suggesting that speculative

29
motives play a role. A 1-percent increase in the bitcoin price is associated with an increase in
volume of about 0.2-0.3 percent. Volumes also react positively to ether prices, but to a lesser extent
and the ether price loses statistical significance in some models. These findings point to Bitcoin
being perceived as the benchmark crypto-asset. Model 4 (and 9) show that crypto-volumes also
increase when the VIX falls and risk appetite increases. A 10-point decrease in the VIX (about one
standard deviation) results in an 86-percent increase in crypto volumes. However, the coefficient’s
magnitude shrinks significantly in Model 5 (and 10) and switches sign. This is due to the inclusion
of inflation expectations which is negatively correlated with VIX (ρ = - 0.55) and as such may also
partly reflect risk sentiment.

Finally, accounting for all factors, the pandemic dummy is highly significant in Model 5 (and 10)
and shows that since the outbreak of the pandemic in 2020, volumes have increased by about 190
percent for all countries. At 211 percent, growth is even higher in EMDEs.

Turning to the country factors, Model 1 (and 6) show that they explain little variation in crypto
volumes with an adjusted R-squared of 0.01 – lagged inflation and exchange rate changes lose
significance and shrink in magnitude when global factors are included. The exchange rate enters
positively and statistically significant at the 10-percent level in the full Model 5 (and 10),
suggesting that a 1-percent depreciation in the exchange rate is associated with an increase in 0.77
percent in volumes. While this result fits the macro hedge narrative for local conditions, it is not
robust.

As described in the data section, the average transaction sizes for bitcoin and ether are well over
US$20 million, suggesting that most of the trading occurs by institutions and professionals which
may behave differently than smaller users who may focus more on domestic macroeconomic
conditions. Indeed, large and institutional investors may provide trading, exchange, market
making, and custody services and have diversified operations across countries which may make
them less susceptible to local macro-economic conditions in individual countries. For Bitcoin,
there is evidence that a significant amount of transaction volume occurs between exchanges
(Marakov and Schoar, 2021).

In this context, to better understand the behavior of smaller investors, Table 6 contains the results
for volumes associated with small transactions only (i.e., <US$10k). The results are broadly
similar to total volumes in Table 5: in contrast to the country factors, key global factors are
consistently statistically significant at the 1-percent level across all specifications and samples. A

30
few differences stand out for smaller transactions, possibly pointing to different behavior between
larger or institutional and retail investors. Focusing on Model 5 (and 10), the magnitude of U.S.
inflation expectations is about half compared to Table 5 but remains economically very relevant.
At the same time, the bitcoin price coefficient is about twice as large, while the ether price results
are weaker. Further, the pandemic dummy implies that retail volumes have grown less compared
to total volumes: 105 percent and 119 percent for all countries and EMDEs only, respectively.
Finally, the factors are able to explain somewhat less of the variation volumes for smaller
transactions: the adjusted R-squared is about 0.58-0.65 compared to 0.70-0.75 in Table 5.

5.2 Robustness and extensions of the main results

Robustness
This section documents several robustness checks of the main results in Tables 5 and 6. Tables 7
and 8 report the results using alternative measures for three indicators. First, we use the country-
level change in Broad Money instead of inflation (ρ = 0.69). Note that our sample size drops
significantly due to missing observations for this indicator. However, the results are broadly
similar: when considering small transactions, Model 1 (and 5) shows that an increase in broad
money is also associated with an increase in crypto volumes at the 10-percent level of significance,
but it loses significance once global factors are included. Second, we use the U.S. 10-year
Breakeven Inflation Rate, the expected average inflation rate over the next 10 years which is also
derived from Treasury yields, instead of the U.S. 5-year, 5-year forward Inflation Expectation Rate
(ρ = 0.97). The coefficient on the 10-year breakeven rate has a similar sign and magnitude and is
also significant at the 1-percent level. Finally, we use the U.S. BBB Corporate Bond Spread as an
alternative proxy for risk appetite (higher values indicate higher risk aversion), instead of the VIX
(ρ = 0.78). Similar to the VIX, Model 4 (and 9) show that crypto volumes fall when risk aversion
increases. A 1-percent increase in the corporate bond spread reduces crypto volumes by about 0.5
percent. However, in Model 5 (and 10) the coefficient changes sign in the presence of inflation
expectations, similar to the results in Table 5.

We also undertook various unreported robustness checks. First, as auto-correlation may be present
in the dependent variable, in unreported results we add to the specification in Tables 5 and 6 the
1-month lagged independent variable as a separate robustness check and the results continue to

31
qualitatively hold. Second, we winsorized the dependent variable and all independent variables at
the 1st and 99th percentiles to reduce the role of influential outliers and find that our results remain.

Extensions to different type of crypto-assets

Table 9 presents the results for volumes of all transaction sizes associated with four different
crypto-assets: 1) bitcoin, the largest crypto-asset by market capitalization, 2) ether, the second
largest crypto-asset in terms of market capitalization, 3) stablecoins, and 4) all crypto-assets
excluding stablecoins. After presenting detailed analyses in Tables 5 and 6, in Table 9 we focus on
regressions which contain all factors as presented in Model 5 (and 10) in these tables.

Table 9 shows that the main results broadly hold across different crypto-assets for volumes
associated with transactions of all sizes in both the full country and EMDEs only samples. Model
1 (and 5) shows that bitcoin volumes are most responsive to bitcoin prices, but least responsive to
U.S. inflation-adjusted 10-year yields and U.S. inflation expectations. The pandemic dummy also
shows that bitcoin volumes exhibited the lowest growth. Compared to other crypto-assets, the
regression explains the least variation in bitcoin volumes, as indicated by the lowest R-squared.
Model 2 (and 6) shows that ether is most sensitive to U.S. inflation expectations and is relatively
more responsive to bitcoin than ether prices. The pandemic dummy shows that ether volumes have
increased the most. Model 3 (and 7) documents that stablecoin volumes are not significantly
associated with crypto-asset prices and increase the most in response to a fall in gold prices. Model
4 (and 8) shows that both bitcoin and ether prices are statistically significant for non-stablecoin
volumes, although the responsiveness to bitcoin prices is much larger.

Table 10 repeats the exercise in Table 9, focusing on crypto volumes associated with small
transaction sizes instead (i.e., <US$10k), and shows that the main results also broadly hold across
different crypto-assets in this case. Model 1 (and 5) suggests that the 10-year yield is only not
statistically significant for bitcoin volumes. Somewhat surprisingly, Model 2 (and 6) indicates that
ether volumes are more responsive to bitcoin prices. More broadly, compared to Table 9, the
magnitude of the U.S. inflation expectations coefficient is smaller and ether prices are less relevant
for volumes. Further, the pandemic dummy shows that volumes for smaller transactions have
exhibited less growth compared to total volumes across all types of crypto-assets.

32
5.3 Cross-sectional regressions
In Table 11 we complement the panel regressions by conducting cross-sectional regressions to
take initial steps to explore whether financial development, remittances, economic freedom, and
ICT adoption can help explain the cross-sectional variation in crypto-assets volumes. We focus on
2020, the year for which we have complete data. Panel A documents the results for volumes for
all transaction sizes whereas Panel B focuses on volumes associated with small transaction sizes
only (<US$10k). We divide the crypto volumes by nominal GDP to account for scale differences
between countries to obtain a country’s relative measure of crypto activity.

The results are broadly similar in both panels. In all regressions we control for the level of
economic development as captured by log GDP per capita. Model 1 shows that economic
development does not appear to play a significant role, but subsequent regressions (Model 4 and
5) which control for additional factors, suggest that less economically developed countries exhibit
higher crypto volumes. Model 1 also shows that financial development in terms of financial sector
depth or inclusion does not appear to play a substantive role, implying that crypto-assets are not
perceived as an important substitute for traditional financial services. Model 2 suggests that
countries with higher remittances received exhibit more crypto activity. This is consistent with the
idea that crypto-assets may address some of the challenges associated with cross-border payments
which can be slow and costly, but further research is necessary to substantiate this. A 1-percentage
point increase in remittances to GDP is associated with a 3 to 4-percent increase in crypto-assets
activity. Model 3 implies that countries with fewer monetary freedoms experience higher crypto-
assets volumes (significance at the 5 percent level in both panels). A one-point decrease on the
monetary freedoms scale (0-100), is associated with a 2.9 percent increase in crypto-assets
volumes. This finding supports the idea that crypto-assets are more popular in countries with
weaker price stability and more repressive price controls. We find however support for the opposite
association for countries with more financial freedoms (i.e., more efficient banking systems and
limited government control in the financial sector), perhaps because the financial sector under such
conditions is more willing to facilitate crypto activity. Model 4 suggests that crypto activity is
higher in countries with higher mobile penetration and fixed broadband subscriptions per capita.
The coefficients are significant at the 5 percent level and the 1 percent level, respectively, and
further suggest that the association with broadband subscriptions is stronger than mobile phones.
One additional subscription out of 100 people is associated with around 5 percent increase in
crypto activity. These findings are intuitive as crypto-assets usage requires basic ICT infrastructure

33
and mobile crypto-assets apps are popular. Finally, Model 5 includes all factors simultaneously.
Economic development, remittances, mobile phone, and fixed broadband are all statistically
significant. A 1-percent decrease in GDP per capita is associated with almost 0.4 percent increase
in crypto activity. Moreover, the remittances coefficient also roughly doubles in magnitude.

6 Conclusions and future research

We study recent monthly on-chain crypto-assets volume – transactions that are directly recorded
on the distributed ledger that underpins a crypto-asset – in over 130 countries covering the period
from April 2019-June 2021, which includes the COVID-19 pandemic and a period of extraordinary
monetary, fiscal, and financial conditions in many countries. We find that crypto volumes have
grown rapidly around the world reaching US$2.8 trillion 15 in the first six months of 2021, driven
by North America and Emerging Market and Developing Economies (EMDEs) in Europe and
Asia. However, even in high-volume regions, total volume remains modest relative to GDP and
retail volume is an order of magnitude smaller (i.e., transactions less than $10k), suggesting still-
limited uptake by retail users: smaller transactions represent about 7 percent of the total volume.
Bitcoin, ether, and a small set of stablecoins represent the large majority of crypto volume, with a
relatively minor, but growing role for Decentralized Finance (DeFi).

As discussed in the Introduction, the emerging crypto-assets industry is diverse offering both
opportunities and risks. In the context of recent rapid evolution, growth, and adoption of crypto-
assets documented in this paper, understanding the main drivers behind crypto-assets usage is
relevant for policy makers, users, and industry alike. As crypto-assets are currently not used at
large scale as a means of payment or to access decentralized financial services, this paper’s main
research question focuses on two common hypotheses: Are crypto-assets used as a risk asset? Do
users across countries perceive them as an emerging hedge against adverse macroeconomic
conditions such as high inflation or currency depreciation? We also explore which country
characteristics are associated with crypto activity.

To help address these questions, we deploy country panel regressions using a parsimonious set of
country and global factors. In short, the results suggest that during our sample period which
includes a period of extraordinarily loose global financial conditions, the variation in countries’

15
It is important to keep in mind that these figures should be interpreted as lower bounds on total crypto-assets activity.
On-chain volumes are eclipsed by approximately US$16 trillion in total volumes in the same period which include
“off-chain” transactions which are only recorded on the private order books of crypto-assets exchanges and other
intermediaries.

34
crypto volumes is mostly driven by global (forward-looking) indicators -- which may ultimately
shape future local macroeconomic conditions through cross-border spillover effects -- rather than
recent (backward-looking) domestic macroeconomic developments. As such, while crypto-asset
markets are still relatively small, a continued rise in scale and global synchronicity of crypto
volumes could produce spillover risks between asset classes and across borders. Our main findings
are broadly robust across different country samples (all countries and EMDEs only), transaction
sizes (all sizes and less than US$10k), and types of crypto-assets (e.g., bitcoin, ether, stablecoins,
and all assets except stablecoins) and are summarized below.

First, we document evidence that lends some support to the hypothesis that crypto users across
countries may perceive crypto-assets as embodying emerging longer-term macro hedging
properties. Controlling for other factors, countries’ crypto volumes consistently rise when U.S.
longer-term inflation expectations increase (based on breakeven inflation rates as embedded in
U.S. Treasury securities yields). 16 Moreover, crypto volumes move inversely with gold prices,
suggesting that users may, to some extent, perceive crypto-assets as an alternative to gold, a
traditional global macro hedge. Indeed, during our sample period flows into gold-linked financial
instruments such as exchange-traded products have fallen, while the opposite is true for crypto-
assets related financial instruments such as funds (JP Morgan, 2021b). At the same time, we do
not find that the country factors (i.e., inflation and exchange rate changes) which reflect recent
local macroeconomic conditions consistently support a macro hedge hypothesis once global
factors are accounted for. In particular, although recent local currency depreciation vis-à-vis the
U.S. dollar is positively associated with countries’ crypto volumes, these associations are not
robustly statistically significant across samples and specifications. Crypto volumes are currently
mainly driven by professional and institutional players which may be less sensitive to local macro-
economic conditions. For example, they may provide trading, exchange, market making, and
custody services and may have diversified operations across countries which may make them less
susceptible to local macro-economic conditions in individual countries. For Bitcoin, there is
evidence that a significant amount of transaction volume occurs between exchanges (Marakov and
Schoar, 2021). Smaller investors may be more sensitive to local macroeconomic conditions.
However, we find that country factors also matter little for crypto volumes associated with smaller
transactions. We leave deeper analysis to future research.

16
When inflation expectations are well-anchored, changes in breakeven inflation may also reflect improvements in
growth expectations and increasing risk appetite.

35
Second, we find empirical evidence that is broadly consistent with the hypothesis that crypto-assets
are regarded as a risk asset. Global financial conditions were extraordinarily loose during our
sample period. Real U.S. 10-year Treasury yields turned negative driven by the pandemic’s impact
and the policy response to support financial markets and stimulate the economy (e.g., quantitative
easing). In this context, we find that countries’ crypto volumes increase when real U.S. 10-year
Treasury yields fall as it also tends to loosen global financial conditions and increase risk appetite.
We further find that crypto volumes fall when our proxies of global risk aversion rise (i.e., the VIX
index and the U.S. BBB corporate bond spread). Related and consistent with earlier literature (e.g.,
Liu and Tsyvinski 2018), we document that volumes typically respond positively to crypto-assets
price momentum, suggesting speculative motives are relevant as well. Some emerging financial
industry analyses indicate that crypto-assets may be a useful addition to a balanced investment
portfolio, also as correlations with traditional asset classes appear relatively low (at least prior to
the COVID-19 pandemic), but their short and volatile history makes it too soon to draw
conclusions (e.g., Goldman Sachs, 2021a and Citi, 2021). However, others have concluded that
crypto-assets are not a viable investment for a diversified portfolio (e.g., Goldman Sachs, 2021b).

Cross-sectional OLS regressions on 2020 crypto volumes for all available countries show that
financial development and economic freedoms do not robustly explain the cross-country variation
in crypto-assets activity associated with both all transaction sizes and smaller transactions only.
However, we find tentative support that crypto activity is higher in less economically developed
countries and in countries with stronger ICT penetration, broadband subscriptions in particular.
We also find that crypto activity is higher in countries where personal remittances play a more
important role. This finding is consistent with Graf von Luckner et al (2021) who study “off chain”
transactions on LocalBitcoins.com, a large peer-to-peer bitcoin exchange. They estimate that about
7 percent of bitcoin transactions are used to make payments, of which 20 percent represents
transactions across borders. While more research is necessary, these results suggest that crypto-
assets may be used as a response to overcome long-standing challenges in cross-border payments
and remittances (including to evade capital controls). Nascent implementations of new promising
technologies (e.g., the Lightning Network, see Poon and Dryja (2016)) that could address current
transaction throughput challenges of crypto-assets may help accelerate adoption for (cross-border)
payment transactions, but these technologies are largely untested at scale and may also pose new
risks.

36
Our findings shine new light on the rapid growth and diverse drivers behind crypto-assets activity
and offer support to the notions that crypto-assets are perceived as a risk asset, a potential macro
hedge, and a potential tool to support cross-border payments. However, our results should be
interpreted with caution. The crypto-assets industry represents an emerging heterogeneous asset
class and while our sample spans over 130 countries, it covers just 27 months which include the
COVID-19 pandemic and an environment of extraordinary fiscal, monetary, and financial sector
conditions which may change when policy support is withdrawn. Moreover, our crypto-assets
volume data are based on estimates and rely on important limiting assumptions. Further, our data
exclude significant volumes of “off-chain” transactions. Finally, several other factors also inhibit
us from drawing strong conclusions: the industry’s track record is relatively short, the technologies
are still rapidly evolving, and there are significant uncertainties around future global and national
adoption and regulation.

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 Table 2: Variable definitions and sources
Variable
Data Type Variable Name Definition Sources
Type
Dependent Crypto-assets On-chain crypto- Log monthly on-chain crypto-assets volume (in
Chainalysis
Variable activity assets volume US$)
Year-on-year change in the monthly Consumer IMF International
Inflation
Price Index (CPI) Financial Statistics
Macroeconomic
Exchange Rate Month-on-month change rate in exchange rates, IMF International
factors (monthly
Change national currency per USD, end of period Financial Statistics
basis)
IMF International
Broad Money Year-on-year change in monthly broad money
Financial Statistics
Bitcoin Price
Month-on-month bitcoin price change (in US$) Federal Reserve
Change
Ether Price Change Month-on-month ether price change (in US$) Federal Reserve
CBOE Index of market’s expectation of future
VIX Federal Reserve
S&P500 U.S. equity market volatility
U.S. BBB ICE BofA BBB US Corporate Index Option-
Independent Corporate Spread Adjusted Spread is a computed OAS index of all
Variables for Federal Reserve
bonds in a given rating category and a spot Treasury
panel Global Financial curve
regressions Factors (monthly U.S. Inflation 5-Year, 5-Year Forward U.S. Inflation Expectation
basis) Expectation Rate Rate, derived from U.S. Constant Maturity Treasury Federal Reserve
Securities
U.S. 10-Year Average expected inflation in the next 10 years
Breakeven derived from 10-Year U.S. Treasury Securities and Federal Reserve
Inflation Rate similar Inflation-Indexed Securities
U.S. 10-year Yield Market Yield on U.S. Treasury Securities at 10- Federal Reserve
(inflation adjusted) Year Constant Maturity, Inflation-Indexed
Month-on-month change rate in Gold price per Troy
Gold Price Change Federal Reserve
ounce
COVID Pandemic One if month is March 2020 or later and zero
Other Authors’ calculations
Dummy otherwise
Economic Log value of GDP per capita (PPP, constant 2017 World Bank World
GDP per capita
development international USD) Development Indicators
World Development
Domestic Credit Domestic bank credit to private sector (% of GDP)
Indicators
Financial
Account ownership at a financial institution or with
development Financial Account World Bank World
a mobile-money-service provider (% of population
Ownership Development Indicators
ages 15+)
World Bank World
Independent Remittances Remittances Personal remittances, received (% of GDP)
Development Indicators
Variables for
Monetary freedom combines a measure of inflation
annual cross- Monetary Freedom
with an assessment of various government activities The Heritage Foundation
sectional Index
that distort prices. (100 – free, 0 - repressed)
regressions Economic
Financial freedom is an indicator of banking
Freedoms
Financial Freedom efficiency as well as a measure of independence from
The Heritage Foundation
Index government control and interference in the financial
sector. (100 – free, 0 - repressed)
Cell Phone World Bank World
Mobile cellular subscriptions (per 100 people)
Subscriptions Development Indicators
ICT development
Broadband World Bank World
Fixed broadband subscriptions (per 100 people)
Subscriptions Development Indicators

41
Table 3: Summary statistics
Panel A: On-chain crypto-assets volume (country-month) (in US$ thousands)
Crypto-asset type N Mean S.D. Min Median Max
Bitcoin 19,765 57.92 309.87 0.00 4.05 11,516.26
Ether 33,333 38.50 298.30 0.00 0.66 21,826.42
DeFi & Others 957,603 0.50 11.38 0.00 0.00 5,077.40
Stablecoins 130,393 7.64 55.88 0.00 0.07 4,078.74
All 1,141,094 3.42 69.46 0.00 0.00 21,826.42
Panel B: Main variables (country - month)
Variable N Mean S.D. Min Median Max
Key dependent variables
Log monthly on-chain crypto-assets volume (all transaction 3,855 18.31 2.46 8.35 18.42 25.45
sizes)
Log monthly on-chain crypto-assets volume (transaction 3,855 16.13 2.21 5.81 16.25 22.35
size < US$10K)
Independent variables
Inflation (yoy) 3,193 0.04 0.09 -0.05 0.02 1.46
Exchange rate change (mom) 3,722 0.00 0.04 -0.43 0.00 1.29
Broad money change (yoy) 2,288 0.14 0.33 -0.66 0.10 6.75
Panel C: Global financial conditions (monthly)
Variable N Mean S.D. Min Median Max
Bitcoin Price Change (mom) 27 0.11 0.24 -0.36 0.09 0.62
Ethereum Price Change (mom) 27 0.15 0.31 -0.39 0.09 0.77
VIX 27 23.50 9.80 12.62 19.40 53.54
U.S. BBB Corporate bond spread 27 4.24 1.26 3.06 3.73 8.09
U.S. Inflation Expectation Rate (5-year, 5-year forward) 27 1.82 0.26 1.25 1.85 2.27
U.S. 10-year breakeven inflation rate 27 1.74 0.40 0.87 1.70 2.42
U.S. 10-year Yield (inflation adjusted) 27 -0.40 0.52 -1.08 -0.50 0.56
Gold Price Change (mom) 27 0.01 0.05 -0.07 0.01 0.12

42
D: Summary statistics of variables (yearly, 2020 only)
Variable N Mean S.D. Min Median Max
Log on-chain crypto-assets volume/GDP (all transaction
147 -4.37 1.15 -8.91 -4.31 -1.69
sizes)
Log on-chain crypto-assets volume/GDP (transaction
147 -6.43 1.06 -10.24 -6.43 -3.75
size < US$10K)
Log GDP per capita 194 8.63 1.40 5.54 8.53 11.67
Credit to private sector (% of GDP) 194 66.10 49.94 1.93 52.97 266.61
Account ownership (% of adult population) 165 61.63 25.73 8.57 58.84 99.92
Personal remittances, received (% of GDP) 229 4.68 6.61 0.00 2.33 38.98
Monetary Freedom Index 184 74.65 10.88 0 76.9 87
Financial Freedom Index 181 48.95 19.28 0 50 90
Mobile cellular subscriptions (per 100 people) 188 111.68 30.17 43.93 112.06 291.65
Fixed broadband subscriptions (per 100 people) 184 17.61 14.53 0.00 15.70 53.20

43
 Table 4: Correlation matrices
Panel A: Independent variables (country - month)
Country factors Global factors
Inflation Exchange Broad Bitcoin Ether VIX U.S. BBB U.S. U.S. 10- U.S. 10-
Change Rate Money Price Price Corporate 5Y5Y year year
Change Change Change Change bond Inflation breakeven Yield
spread Exp. Rate inflation
Exchange Rate Change 0.15 1.00
Broad Money Change 0.69 0.39 1.00
Bitcoin Price Change 0.01 -0.08 0.00 1.00
Ether Price Change 0.00 -0.11 0.01 0.66 1.00
VIX -0.01 0.11 0.05 -0.08 0.03 1.00
U.S. BBB Corporate bond spread -0.02 0.07 0.06 -0.09 -0.05 0.78 1.00
U.S. 5Y5Y Inflation Exp. Rate 0.00 -0.07 -0.02 0.10 0.18 -0.55 -0.66 1.00
U.S. 10-year breakeven inflation 0.00 -0.07 -0.02 0.09 0.20 -0.48 -0.67 0.97 1.00
U.S. 10-year Yield 0.02 0.07 -0.08 -0.04 -0.28 -0.37 -0.29 -0.23 -0.30 1.00
Gold Price Change 0.02 -0.12 0.00 0.04 0.13 -0.04 0.05 -0.12 -0.18 0.09

Panel B: Independent variables (annual, 2020 only)

Log GDP Credit to Account Personal Monetary Financial Mobile
per capita private ownership remittances, Freedom Freedom cellular
sector received Index Index subscriptions
Bank credit to private sector 0.63 1.00
Account ownership 0.83 0.55 1.00
Personal remittances, received -0.45 -0.26 -0.43 1.00
Monetary Freedom Index 0.38 0.28 0.24 -0.18 1.00
Financial Freedom Index 0.66 0.51 0.51 -0.21 0.48 1.00
Mobile cellular subscriptions 0.48 0.43 0.42 -0.30 0.23 0.35 1.00
Fixed broadband subscriptions 0.85 0.59 0.75 -0.30 0.29 0.57 0.37
 Table 5: Panel Regressions – Main result: Volume of transactions of all sizes for all crypto-assets
Dependent Variable: Log monthly on-chain crypto-assets volume (all transaction sizes), US dollars
Variable (1)    (2)    (3)    (4)    (5)   
All Countries
Inflation (yoy) 1.480*** 0.724    -0.024    0.444    -0.003   
Change exchange rate (mom) -3.220*** -0.754    1.765*** 2.808*** 0.763*  
Change Bitcoin price (mom)     0.468*** 0.273*** 0.367*** 0.271***
Change Ether price (mom)     0.611*** 0.058    0.347*** 0.094** 
US 10-year Yield (inflation adjusted)         -0.386***     -0.490***
US Inflation Expectation Rate         2.745***     2.869***
VIX             -0.062*** 0.011***
Change gold price (mom)             -2.609*** -1.380***
Pandemic dummy     1.448*** 1.318*** 2.344*** 1.057***
N of Observations 3095    3095    3095    3095    3095   
N of clusters (countries) 136    136    136    136    136   
Adjusted R squared 0.008    0.450    0.751    0.575    0.755   
Country-Fixed Effects? YES    YES    YES    YES    YES   

Variable (6)    (7)    (8)     (9)    (10)    

EMDEs only
Inflation (yoy) 1.525*** 0.420    -0.144    0.169    -0.132   
Change exchange rate (mom) -2.025**  -1.132*   1.576*** 1.962*** 0.976*  
Change Bitcoin price (mom)     0.527*** 0.170*   0.376*** 0.188*  
Change Ether price (mom)     0.515*** 0.064    0.303*** 0.100*  
US 10-year Yield (inflation adjusted)         -0.397***     -0.492***
US Inflation Expectation Rate         2.680***     2.722***
VIX             -0.058*** 0.007***
Change gold price (mom)             -3.100*** -1.636***
Pandemic dummy     1.459*** 1.343*** 2.311*** 1.132***
N of Observations 1837    1837    1837    1837    1837   
N of clusters (countries) 85    85    85    85    85   
Adjusted R squared 0.008    0.433    0.698    0.545    0.702   
Country-Fixed Effects? YES    YES    YES    YES    YES   
*** p<0.01, ** p<0.05, * p<0.1. Standard errors clustered at the country level. All independent variables are lagged by one month, except the pandemic
dummy. Bitcoin, ether, and gold prices expressed in US dollars. The gold price is expressed per Troy ounce. A constant is estimated, but not reported.
 Table 6: Panel Regressions – Main result: Volume of small transactions for all crypto-assets
Dependent Variable: Log monthly on-chain crypto-assets volume (transaction size < US$10K), US dollars
Variable (1)    (2)    (3)    (4)    (5)   
All Countries
Inflation (yoy) 1.032*** 0.500    0.073    0.334    0.098   
Change exchange rate (mom) -2.685*** -0.878**  0.698**  1.159*** 0.156   
Change Bitcoin price (mom) 0.587*** 0.498*** 0.521*** 0.491***
Change Ether price (mom) 0.292*** -0.035    0.139*** -0.004   
US 10-year Yield (inflation adjusted)     -0.394***     -0.431***
US Inflation Expectation Rate     1.434***     1.398***
VIX     -0.038*** 0.001   
Change gold price (mom)         -2.008*** -1.486***
Pandemic dummy 1.023*** 0.784*** 1.566*** 0.717***
N of Observations 3095    3095    3095    3095    3095   
N of clusters (countries) 136    136    136    136    136   
Adjusted R squared 0.010    0.452    0.643    0.551    0.649   
Country-Fixed Effects? YES    YES    YES    YES    YES   

Variable (6)    (7)    (8)    (9)     (10)    

EMDEs only
Inflation (yoy) 1.175*** 0.393    0.054    0.237    0.064   
Change exchange rate (mom) -1.756*** -1.106**  0.528    0.797*   0.307   
Change Bitcoin price (mom) 0.536*** 0.360*** 0.441*** 0.370***
Change Ether price (mom) 0.249*** -0.025    0.120**  0.001   
US 10-year Yield (inflation adjusted)     -0.390***     -0.416***
US Inflation Expectation Rate     1.413***     1.322***
VIX     - -0.037*** -0.002   
Change gold price (mom)         -2.199*** -1.564***
Pandemic dummy 1.031*** 0.810*** 1.564*** 0.785***
N of Observations 1837    1837    1837    1837    1837   
N of clusters (countries) 85    85    85    85    85   
Adjusted R squared 0.010    0.411    0.574    0.498    0.579   
Country-Fixed Effects? YES    YES    YES    YES    YES   
*** p<0.01, ** p<0.05, * p<0.1. Standard errors clustered at the country level. All independent variables are lagged by one month, except the pandemic
dummy. Bitcoin, ether, and gold prices expressed in US dollars. The gold price is expressed per Troy ounce. A constant is estimated, but not reported.
 Table 7: Panel Regressions – Robustness of main result to alternative indicators: Volume of all transactions for all crypto-assets
Dependent Variable: Log monthly on-chain crypto-assets volume (all transaction sizes), US dollars
Variable (1)    (2)    (3)    (4)    (5)   
All Countries
Change in broad money (yoy) 0.779    0.028    -0.057    -0.026    -0.061   
Change exchange rate (mom) -1.865    -0.597    0.940*** 0.972*** 0.633   
Change Bitcoin price (mom) 0.580*** 0.406*** 0.641*** 0.342***
Change Ether price (mom) 0.574*** -0.021    0.049    0.054   
US 10-year Yield (inflation adjusted) -0.242*** -0.353***
US 10-year breakeven inflation rate 1.911*** 2.337***
US BBB Corporate bond spread -0.533*** 0.196***
Change gold price (mom) -1.305*** -0.754**
Pandemic dummy 1.494*** 1.395*** 2.417*** 0.969***
N of Observations 2258    2258    2258    2258    2258   
N of clusters (countries) 102    102    102    102    102   
Adjusted R squared 0.017    0.451    0.749    0.635    0.756   
Country-Fixed Effects? YES    YES    YES    YES    YES   

Variable (6)    (7)    (8)     (9)    (10)    

EMDEs only
Change in broad money (yoy) 0.671    0.034    -0.065    -0.027    -0.069   
Change exchange rate (mom) -1.195    -0.467    1.084*** 1.102*** 0.811** 
Change Bitcoin price (mom) 0.548*** 0.364*** 0.606*** 0.302***
Change Ether price (mom) 0.560*** -0.038    0.036    0.041   
US 10-year Yield (inflation adjusted) -0.298*** -0.411***
US 10-year breakeven inflation rate 1.904*** 2.303***
US BBB Corporate bond spread -0.535*** 0.187***
Change gold price (mom) -1.502*** -0.963** 
Pandemic dummy 1.529*** 1.385*** 2.457*** 0.967***
N of Observations 1689    1689    1689    1689    1689   
N of clusters (countries) 78    78    78    78    78   
Adjusted R squared 0.014    0.443    0.731    0.623    0.737   
Country-Fixed Effects? YES    YES    YES    YES    YES   
*** p<0.01, ** p<0.05, * p<0.1. Standard errors clustered at the country level. All independent variables are lagged by one month, except the pandemic
dummy. Bitcoin, ether, and gold prices expressed in US dollars. The gold price is expressed per Troy ounce. A constant is estimated, but not reported.
 Table 8: Panel Regressions – Robustness of main result to alternative indicators: Volume of small transactions for all crypto-assets
Dependent Variable: Log monthly on-chain crypto-assets volume (transaction size < US$10K), US dollars
Variable (1)    (2)    (3)    (4)    (5)   
All Countries
Change in broad money (yoy) 0.663*   0.136    0.070    0.108*   0.066   
Change exchange rate (mom) -0.974    -0.045    0.873**  0.734    0.604   
Change Bitcoin price (mom) 0.648*** 0.570*** 0.677*** 0.527***
Change Ether price (mom) 0.276*** -0.070    0.009    -0.004   
US 10-year Yield (inflation adjusted) -0.311***     -0.405***
US 10-year breakeven inflation rate 0.990***     1.252***
US BBB Corporate bond spread -0.284*** 0.131***
Change gold price (mom) -1.324*** -1.190***
Pandemic dummy 1.057*** 0.842*** 1.541*** 0.530***
N of Observations 2258    2258    2258    2258    2258   
N of clusters (countries) 102    102    102    102    102   
Adjusted R squared 0.021    0.432    0.605    0.538    0.613   
Country-Fixed Effects? YES    YES    YES    YES    YES   

Variable (6)    (7)    (8)     (9)    (10)    

EMDEs only
Change in broad money (yoy) 0.584*   0.136    0.062    0.105    0.059   
Change exchange rate (mom) -0.441    0.094    1.015*** 0.886*   0.776   
Change Bitcoin price (mom) 0.607*** 0.527*** 0.634*** 0.485***
Change Ether price (mom) 0.262*** -0.090    0.000    -0.016   
US 10-year Yield (inflation adjusted) -0.372***     -0.475***
US 10-year breakeven inflation rate 0.978***     1.232***
US BBB Corporate bond spread -0.284*** 0.131***
Change gold price (mom) -1.558*** -1.463***
Pandemic dummy 1.088*** 0.821*** 1.571*** 0.496***
N of Observations 1689    1689    1689    1689    1689   
N of clusters (countries) 78    78    78    78    78   
Adjusted R squared 0.019    0.416    0.580    0.516    0.589   
Country-Fixed Effects? YES    YES    YES    YES    YES   
*** p<0.01, ** p<0.05, * p<0.1. Standard errors clustered at the country level. All independent variables are lagged by one month, except the pandemic
dummy. Bitcoin, ether, and gold prices expressed in US dollars. The gold price is expressed per Troy ounce. A constant is estimated, but not reported.
 Table 9: Panel Regressions – Volume of all transactions across different crypto-assets
Dependent Variable: Log monthly on-chain bitcoin volume (all transaction sizes), US dollars
Variable (1)     (2)     (3)     (4)    
Bitcoin    Ether    Stablecoins    Non-stablecoins   
All countries
Inflation (yoy) -0.286    0.358    -0.115    0.017   
Change exchange rate (mom) 0.582*   0.934    1.035    0.709*  
Change Bitcoin price (mom) 0.522*** 0.420*** 0.089    0.329***
Change Ether price (mom) -0.020    0.087*   0.047    0.111***
US 10-year Yield (inflation adjusted) -0.160*** -0.803*** -0.959*** -0.338***
US Inflation Expectation Rate 1.953*** 4.311*** 2.518*** 2.998***
VIX 0.007*** 0.022*** 0.008*** 0.012***
Change gold price (mom) -1.106*** -1.165*** -2.182*** -1.139***
Pandemic dummy 0.891*** 1.427*** 0.976*** 1.095***
N of Observations 3095    3095    3095    3095   
N of clusters (countries) 136    136    136    136   
Adjusted R squared 0.634    0.828    0.726    0.752   
Country-Fixed Effects? YES    YES    YES    YES   

Variable (5)    (6)     (7)     (8)    

Bitcoin    Ether    Stablecoins    Non-stablecoins   
EMDEs only
Inflation (yoy) -0.402*   0.246    -0.247    -0.115   
Change exchange rate (mom) 0.608    1.076    1.428*   0.882*  
Change Bitcoin price (mom) 0.415*** 0.286**  -0.073    0.270***
Change Ether price (mom) -0.032    0.157**  0.096    0.105*  
US 10-year Yield (inflation adjusted) -0.202*** -0.751*** -0.935*** -0.357***
US Inflation Expectation Rate 1.850*** 4.089*** 2.399*** 2.834***
VIX 0.003    0.021*** 0.005*   0.008***
Change gold price (mom) -1.374*** -1.322*** -2.427*** -1.411***
Pandemic dummy 0.960*** 1.500*** 1.099*** 1.149***
N of Observations 1837    1837    1837    1837   
N of clusters (countries) 85    85    85    85   
Adjusted R squared 0.590    0.780    0.672    0.698   
Country-Fixed Effects? YES    YES    YES    YES   
*** p<0.01, ** p<0.05, * p<0.1. Standard errors clustered at the country level. All independent variables are lagged by one month, except the
pandemic dummy. Bitcoin, ether, and gold prices expressed in US dollars. The gold price is expressed per Troy ounce. A constant is estimated, but
not reported
 Table 10: Panel Regressions – Volume of small transactions across different crypto-assets
Dependent Variable: Log monthly on-chain bitcoin volume (transaction size < US$10K), US dollars
Variable (1)     (2)     (3)     (4)    
Bitcoin    Ether    Stablecoins    Non-stablecoins   
All countries
Inflation (yoy) -0.117    0.192    0.451    0.006   
Change exchange rate (mom) 0.041    0.030    0.465    0.055   
Change Bitcoin price (mom) 0.416*** 0.814*** 0.466*** 0.491***
Change Ether price (mom) -0.018    -0.031    -0.109*** 0.021   
US 10-year Yield (inflation adjusted) -0.058    -0.737*** -0.996*** -0.328***
US Inflation Expectation Rate 0.683*** 2.720*** 0.696*** 1.598***
VIX -0.001    0.011*** -0.008*** 0.004***
Change gold price (mom) -0.853*** -2.505*** -1.651*** -1.496***
Pandemic dummy 0.512*** 0.914*** 0.694*** 0.707***
N of Observations 3095    3095    3095    3095   
N of clusters (countries) 136    136    136    136   
Adjusted R squared 0.363    0.741    0.570    0.655   
Country-Fixed Effects? YES    YES    YES    YES   

Variable (5)    (6)     (7)     (8)    

Bitcoin    Ether    Stablecoins    Non-stablecoins   
EMDEs only
Inflation (yoy) -0.141    0.206    0.272    0.012   
Change exchange rate (mom) 0.013    0.510    0.552    0.222   
Change Bitcoin price (mom) 0.323*** 0.655*** 0.331*** 0.363***
Change Ether price (mom) -0.035    0.010    -0.090    0.028   
US 10-year Yield (inflation adjusted) -0.073    -0.685*** -1.110*** -0.281***
US Inflation Expectation Rate 0.640*** 2.663*** 0.579*** 1.544***
VIX -0.003    0.010*** -0.013*** 0.002   
Change gold price (mom) -1.057*** -2.503*** -1.951*** -1.555***
Pandemic dummy 0.569*** 0.955*** 0.769*** 0.771***
N of Observations 1837    1837    1837    1837   
N of clusters (countries) 85    85    85    85   
Adjusted R squared 0.299    0.684    0.544    0.575   
Country-Fixed Effects? YES    YES    YES    YES   
*** p<0.01, ** p<0.05, * p<0.1. Standard errors clustered at the country level. All independent variables are lagged by one month, except the pandemic
dummy. Bitcoin, ether, and gold prices expressed in US dollars. The gold price is expressed per Troy ounce. A constant is estimated, but not reported.
Table 11: Cross-sectional Regressions – Volume for all crypto-assets (all countries, 2020)
Panel A: Volume of all transactions

Dependent Variable: Log annual on-chain crypto-assets volume as a fraction of nominal GDP (all transaction sizes)
Variable (1) (2) (3) (4) (5)
Financial Remittances Economic Freedoms ICT development All
development
Log GDP per capita 0.107    0.317*** 0.113    -0.383*** -0.366*  
Credit to private sector -0.001                -0.004   
Transaction account ownership 0.004                0.009   
Personal remittances received     0.040**          0.097***
Monetary Freedom         -0.029**      -0.002   
Financial Freedom         0.017**      0.010   
Mobile cellular subscriptions             0.008**  0.011***
Fixed broadband subscriptions             0.052*** 0.042***
N of Observations 107    139    143    118    88   
Adjusted R squared 0.026    0.102    0.088    0.174    0.311   

Panel B: Volume of small transactions

Dependent Variable: Log annual on-chain crypto-assets volume as a fraction of nominal GDP (transaction size < US$10K)
Variable (1) (2) (3) (4) (5)
Financial Remittances Economic Freedoms ICT development All
development
Log GDP per capita 0.038    0.204*** 0.058    -0.414*** -0.379** 
Credit to private sector -0.001                -0.004   
Transaction account ownership 0.004                0.008   
Personal remittances received     0.032*           0.062** 
Monetary Freedom         -0.029**      -0.013   
Financial Freedom         0.013*       0.009   
Mobile cellular subscriptions             0.007**  0.010** 
Fixed broadband subscriptions             0.046*** 0.037***
N of Observations 107    139    143    118    88   
Adjusted R squared -0.007    0.049    0.056    0.127    0.172   
*** p<0.01, ** p<0.05, * p<0.1 OLS regressions. Robust standard errors. Constant is estimated but not reported.
Annex: Additional charts
Figure A1: On-chain Crypto-assets Volume (2021)

Panel A: Volume by Region for All Transaction Sizes Panel B: Volume by Region for Small Transactions (<US$10k)
% of total % of total

Source: Chainalysis; World Bank staff calculations.

Note: EAS = East Asia and Pacific; ECS = Europe and Central Asia; LCN = Latin America and Caribbean; MEA = Middle East and North Africa; NAC = Northern
America; SAS = South Asia, SSF = Sub-Saharan Africa.
 Panel C: Volume by Income Level for All Transaction Sizes Panel D: Volume by Income Level Aggregated by Year
US$ US$

Source: Chainalysis; World Bank staff calculations.

Note: 2021 data cover the period January - June.
 Panel E: Crypto-assets Volume Breakdown by Year and Region
US$

Source: Chainalysis; World Bank staff calculations.

Note: 2021 data is year to date and cover the period January - June.
Figure A2: On-Chain Crypto-assets Volume by Type of Crypto-asset
Panel A: All Transaction Sizes Panel B: Small Transactions (<US$10k)
US$ US$

Source: Chainalysis; World Bank staff calculations.

Note: 2021 data is year to date and cover the period January - June.
 Panel C: All Transaction Sizes Panel D: Small Transactions (<US$10k)
% of total volume % of total volume

Source: Chainalysis; World Bank staff calculations.

Note: 2021 data is year to date and cover the period January - June.
 Panel E: All Transaction Sizes Panel F: Small Transaction Sizes (<US$10k)
US$ US$

Source: Chainalysis; World Bank staff calculations.

Note: 2021 data is year to date and cover the period January - June.