Crypto vs. Fiat: An Institutional Approach

How can cryptocurrency gain legitimacy in the eyes of users? We propose that cryptocurrency firms can acquire market legitimacy that will ultimately reduce institutional uncertainty through rhetorical strategies that circumvent the existing institutional framework (i.e., evasive entrepreneurial action). Drawing on recent theory of institutional uncertainty, we propose a process model in which legitimacy for cryptocurrencies acquired at the market level via evasive action will reduce uncertainty in the formal institutional environment, which will beget additional legitimacy, and thus higher performance to individual crypto firms, on average. This study (1) extends our understanding of the evolution of an innovation and its diffusion under institutional uncertainty, (2) contributes to the development of institutional theory, and (3) provides a theoretical rationale for how cryptocurrency can become a medium of exchange.