Search-Theoretic Approach to Cryptocurrency Adoption and Financial Inclusion

As being unbanked is one of the motivations for using cryptocurrency, this study analyzes the financial inclusion of unbanked individuals that results from the use of peer-to-peer cryptocurrency transactions. By extending the Kiyotaki-Wright model, we construct a dual-currency economy in which traditional money and private cryptocurrency coexist. In this economy, some of the agents are banked while others are unbanked; thus, the traditional payment services provided by banks are limited. Our theoretical model yields a long-run equilibrium condition in which the cryptocurrency is perceived as valuable even though it is not a fully accepted currency. Our analysis suggests that the unbanked population is a contributing factor in bitcoin’s fundamental value