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Cryptocurrency, informal economy, FDI, economic freedom, central bank independence


This research considers a new dimension of the effects of the underground sector by examining the spillovers on cryptocurrency holdings. Cryptocurrencies offer a relatively greater ability to dodge taxes and ensure the anonymity of holders, providing attractive avenues for underground operators to stash their informal-sector earnings. Our results, based on data from more than 50 nations, show that a greater prevalence of the underground economy in a nation is indeed associated with greater cryptocurrency holdings. This result holds across an alternative measure of the shadow economy, and when the bi-directional causality between the shadow economy and cryptocurrency holdings is considered. In other noteworthy findings, greater FDI crowded out cryptocurrency holdings, while greater financial globalization and greater economic uncertainty, ceteris paribus, increased them.

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This article was published Open Access thanks to a transformative agreement between Milner Library and Taylor & Francis.


This article was published in Applied Economics, DOI: 10.1080/00036846.2023.2187039.

This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives License (, which permits non-commercial re-use, distribution, and reproduction in any medium, provided the original work is properly cited, and is not altered, transformed, or built upon in any way.

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