Regulation, Corruption, and Decentralized Autonomous Organizations: Insights from Bitcoin Trading and Platform Founding Between 2011 and 2023

Decentralized autonomous organizations (DAOs) represent a novel organizational form enabling self-governed coordination based on blockchain technology. This study examines the prototypical Bitcoin DAO from an institutional perspective, focusing on how its core features—decentralization and autonomy—interact with the broader institutional framework in which it operates. Specifically, we study how regulative institutional environments (i.e., (il)legalization) shape the growth and development of DAOs while theorizing about the role of both petty and grand corruption (i.e., by higher-level officials) in influencing the effectiveness of these regulative institutions. Our empirical analysis focuses on the global rise of Bitcoin trading and platform establishment across 49 national contexts from 2011 to 2023. Utilizing a unique data set, we find that, although the number of Bitcoin exchange platforms in a country is positively associated with Bitcoin legalization, Bitcoin trading volume is positively associated with Bitcoin illegalization. In countries with higher levels of grand corruption, Bitcoin illegalization becomes even more strongly associated with trading. In contrast, grand corruption dampens the positive association between legalization and the number of Bitcoin exchange platforms. Further, the presence of petty corruption reduces the impact of grand corruption. Our study reveals that it is critical to distinguish between petty and grand corruption as an important factor that influences the interplay between the regulative environment and growth and development of the Bitcoin DAO and the related ecosystem of Bitcoin trading and platform founding.