How economic freedom reflects on the Bitcoin transaction network

Based on the assumption that economic freedom facilitates the growth of traditional economic sectors, this study seeks to understand the role it plays in fintech sector. For this purpose, by adopting the social network analysis methodological approach, it considers the geographical network of Bitcoin transactions as a proxy to measure the national level of fintech development and compares it with a set of economic freedom indicators related to the top 70 world economies. The analysis revealed significant relationships between the performed network centrality measures and national levels of economic freedom. In particular, as confirmed by the implemented multilevel regression models, high levels of freedom to trade internationally combined with a restrained value of inflation and low administrative requirements can be considered as determining factors for fintech development. The study also showed a large number of Bitcoin transactions conducted in those countries characterized by fewer capital controls and restrictions, a result that feeds suspicions of illegal behavior, such as money laundering or terrorism financing, carried out through the use of cryptocurrencies. Findings of this research might be strategic for fintech entrepreneurship and policymakers interested in designing policies that aim to foster innovative sectors while ensuring the legality of financial flows.