Financial inclusion status and cryptocurrency usage in the U.S.

This paper examines cryptocurrency adoption among unbanked, underbanked, and fully banked households in the United States, using data from the 2023 FDIC National Survey of Unbanked and Underbanked Households; the first wave of the survey to include household-level information on cryptocurrency usage. We estimate a Probit model, supplemented by Logit and Linear Probability Model (LPM) specifications as robustness checks, to assess whether underbanked and unbanked households are more likely to adopt cryptocurrency than fully banked households, controlling for a range of demographic and socioeconomic factors. The results consistently show a statistically significant and positive association between underbanked status and the likelihood of cryptocurrency use across all model specifications. Specifically, underbanked households are 1.9 to 2.1 percentage points more likely to use cryptocurrency than their fully banked counterparts, suggesting that cryptocurrency functions as an alternative financial tool for the partially excluded. In contrast, unbanked households either show no statistically significant difference or exhibit a small negative association with cryptocurrency adoption, indicating that cryptocurrency is neither a substitute for formal financial services among the completely excluded nor widely adopted by the fully included. This suggests that those with full access to the financial system likely do not feel the need to seek alternatives. Cryptocurrency adoption is also shaped by key demographic and socioeconomic factors. Younger individuals, men, White respondents, those identifying with two or more races, and individuals with higher income and education levels are significantly more likely to adopt cryptocurrency. Overall, the findings highlight the nuanced role of cryptocurrency as a supplemental financial instrument for the underbanked, rather than a comprehensive solution to financial exclusion particularly for the unbanked.