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

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  • Isaak, Andrew
  • Istipliler, Baris
  • Bort, Suleika
  • Woywode, Michael

Abstract

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.

Suggested Citation

  • Isaak, Andrew & Istipliler, Baris & Bort, Suleika & Woywode, Michael, 2025. "Regulation, Corruption, and Decentralized Autonomous Organizations: Insights from Bitcoin Trading and Platform Founding Between 2011 and 2023," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue ahead of .
    • Handle: RePEc:zbw:espost:329626
    DOI: 10.1287/orsc.2023.18467
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    File URL: https://www.econstor.eu/bitstream/10419/329626/1/isaak-et-al-2025-regulation-corruption-and-decentralized-autonomous-organizations-insights-from-bitcoin-trading-and-2.pdf
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    Keywords

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    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D26 - Microeconomics - - Production and Organizations - - - Crowd-Based Firms

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