Country-level cryptocurrency uncertainty and bank cost of capital
Abu Hanifa Md. Noman, Mohammad Tahmeed Abdullah, Larisa Yarovaya · Economics Letters · 2025
• Employed data of 11,485 bank-year observations of 63 countries. • Cryptocurrency uncertainty is associated with a reduction in banks’s cost of capital. • Results are robust to alternative proxies and controls for endogeneity. • The effect is more pronounced for banks with low competition. • Banks with high interest margin are less sensitive to cryptocurrency uncertainty. This study explores the impact of country-level cryptocurrency uncertainty on bank cost of capital, utilizing data from 63 countries over the period of 2009 to 2023. Our findings indicate that cryptocurrency uncertainty is associated with a reduction in banks’ cost of capital. This result remains robust using alternative proxies and controlling for endogeneity concerns. Additionally, we document that the impact is more pronounced for banks with low market competition, and high interest margin. These results provide valuable insights for policymakers and industry practitioners regarding the implications of cryptocurrency uncertainty on financial institutions.