A team of researchers from the University of Cincinnati has developed a crypto literacy scale (CLS) to address the gap between traditional financial literacy and knowledge about cryptocurrencies and related technology. The researchers argue that, just as financial literacy is crucial for making informed financial decisions and preventing scams, crypto literacy is essential in the modern digital economy. To support cryptocurrency education and literacy efforts worldwide, the team proposes the implementation of a crypto literacy scale and corresponding policies.
In their research paper titled “Measuring Crypto Literacy,” the team emphasizes the need for a standardized measure of crypto literacy. While financial literacy has encouraged the development of programs to improve financial decision-making, increase financial empowerment, and prevent financial scams, there is currently no corresponding scale to measure crypto literacy. The team believes that determining the level of crypto literacy among individuals and policymakers is vital for effective education and policy-making in the crypto space.
The researchers differentiate crypto literacy from overall financial literacy, noting that traditional financial knowledge and decision-making processes do not always apply in the cryptocurrency world. Cryptocurrencies’ decentralized nature and unique characteristics require a specialized understanding to navigate successfully. Therefore, the team developed the CLS by distilling the fundamental knowledge requirements for demonstrating a basic understanding of cryptocurrencies into 10 questions, although the specific questions are not included in the research paper.
To provide context for the importance of financial literacy and its evolution, the researchers refer to the history of financial literacy in the United States. While Benjamin Franklin is often recognized as one of the first advocates for wealth and consumer fiscal responsibility, the term “financial literacy” only gained popularity in the U.S. in 1990. Over the years, the U.S. government has implemented standards and educational practices to improve financial literacy among the population.
During this period, the number of millionaires in the U.S. has increased significantly, indicating the potential impact of financial literacy on wealth accumulation. From approximately 63,642 millionaires in 1990, the U.S. now boasts around 25 million millionaires in 2021, reflecting a staggering increase of about 37,800% in just three decades.
However, as the world of cryptocurrencies and blockchain technology continues to expand, the level of crypto literacy among the global population remains relatively low. A 2022 report from CNBC suggests that only 57% of U.S. adults are considered financially literate concerning traditional finance. In contrast, a non-scientific survey conducted by CryptoLiteracy.org in 2021 reveals that only 4% of U.S. respondents demonstrate cryptocurrency literacy.
These statistics highlight the pressing need for improved crypto literacy worldwide. As cryptocurrencies become increasingly mainstream and more individuals engage with these financial instruments, the lack of knowledge and understanding poses risks for consumers and the broader economy. Addressing this knowledge gap through the implementation of the CLS and related policies can empower individuals to make informed decisions while mitigating potential scams and fraudulent activities.
In conclusion, the University of Cincinnati researchers have developed a crypto literacy scale to measure and standardize knowledge about cryptocurrencies and related technology. By recognizing the distinctiveness of crypto literacy and its importance in the modern digital economy, the researchers call for the implementation of policies and educational programs that prioritize crypto literacy worldwide. With the wealth of information and resources available, individuals and policymakers can enhance their understanding of cryptocurrencies to navigate this rapidly evolving financial landscape more effectively.