Cryptocurrency and the State: Evidence from South Korea

Abstract

National currencies have long been associated with nation-state building and the expansion of state control. The rise of cryptocurrencies has the potential to disrupt state-society relations traditionally mediated through state-issued currencies. However, unregulated cryptocurrencies may be perceived as too unsafe to act as a true alternative to government-regulated currencies or investment vehicles. Cryptocurrency’s failures may instead lead people to appreciate the role of government more. Using the case of South Korea, we show that public discourse on cryptocurrencies has been more negative than positive in recent years. A demographically representative survey experiment reveals that exposing South Koreans to information about the volatility of cryptocurrencies increases their trust in government, as hypothesized. At the same time, exposure to positive information about cryptocurrencies does not undermine trust in government or support for government regulation. These results point to limitations of unregulated cryptocurrencies when it comes to eroding state-society relations.