Title: Cryptocurrency in lower-middle-income countries: a monetary theory and regulation perspective

Authors: Sri Andaiyani; Ariodillah Hidayat; Nyimas Dewi Murnila Saputri; Abdul Bashir

Addresses: Faculty of Economics, Universitas Sriwijaya, Palembang 30139, South Sumatra, Indonesia ' Faculty of Economics, Universitas Sriwijaya, Palembang 30139, South Sumatra, Indonesia ' Faculty of Economics, Universitas Sriwijaya, Palembang 30139, South Sumatra, Indonesia ' Faculty of Economics, Universitas Sriwijaya, Palembang 30139, South Sumatra, Indonesia

Abstract: This study analyses the role of monetary policy and financial openness toward the regulation of the cryptocurrency development market. We used panel data in low-middle-income countries from 2010 to 2019. Using an ordered probit model represents a comprehensive extension of probit analysis capable of handling scenarios of more than two outcomes of an ordinal dependent variable featuring a naturally ordered set of potential values. The findings suggest that de facto financial openness, government effectiveness, and macroeconomic variables such as inflation, interest rates, and trade openness significantly affect the regulation of the cryptocurrency development market while economic growth variables are insignificant. The higher the de facto financial openness, the greater the chances of countries banning the use of crypto to minimise the risks posed. Monetary policy through high-interest rates will lower crypto regulation to be banned meaning it will increase crypto regulation to be liberalised.

Keywords: cryptocurrency; financial openness; monetary policy; law perspective.

DOI: 10.1504/IJBC.2023.135003

International Journal of Blockchains and Cryptocurrencies, 2023 Vol.4 No.3, pp.242 - 256

Received: 29 May 2023
Accepted: 19 Aug 2023
Published online: 24 Nov 2023 *

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