Individual investor trust and cryptocurrency participation: evidence from three Nordic countries

Abstract While the volatile and unregulated cryptocurrency market is growing rapidly, little is known about what drives individual investor motivation to participate. This study investigates how trust, a proven predictor for stock market participation, is linked to cryptocurrency participation among 1,519 individual investors in Denmark, Finland and Sweden, countries characterised by high levels of digital adoption, trust and stock market participation. Our results show that individuals who trust strangers in relation to financial matters are more prevalent cryptocurrency participants, both in terms of current holdings and intended future holdings, compared to less trusting individuals. Furthermore, trust reduces how risky individuals consider cryptocurrencies to be and cryptocurrency knowledge raises people’s risk tolerance. Both trust and knowledge, therefore, contribute to increased cryptocurrency participation. Our study contributes to the debate about the mitigating role of trust for household investment decision making, extending its scope to the novel cryptocurrency market. This research is relevant for actors in the cryptocurrency market including developers, service providers, investors, and financial market regulators.