CryptoLIT: Assessing Digital Financial Fluency

A group of scholars at the University of Cincinnati have recently introduced a crypto aptitude gauge (CAG), aimed at establishing a standard and gauging economic and fiscal understanding concerning cryptocurrencies and their associated technology for consumers and policymakers.

The research paper produced by the team, titled "Quantifying Crypto Competence," outlines the contrast between conventional financial knowledge and crypto proficiency. It emphasizes the necessity for a crypto competence scale and strategies that endorse global cryptocurrency education and proficiency enhancement.

As stated in the paper:

"Appraising financial literacy has motivated policymakers and educators to devise initiatives enhancing financial decision-making skills and bolstering financial autonomy. Nonetheless, there exists no equivalent gauge to assess crypto competence."

The researchers highlight the significance of financial literacy in thwarting scams by endowing individuals with the information, expertise, and assurance to craft well-informed financial judgments.

To formulate the CAG, the researchers delineated cryptocurrency proficiency as distinct from overall financial literacy. They assert that while cryptocurrencies might appear analogous to established financial products, the decision-making mechanisms acquired through a regular financial literacy syllabus are often inapplicable in the realm of cryptocurrencies due to the decentralized nature.

The researchers scrutinized various facets of cryptocurrencies and distilled the essential knowledge prerequisites necessary to exhibit rudimentary comprehension into 10 queries. Though the queries are absent from the paper, accompanying visuals suggest respondents were questioned about their cryptocurrency experience.

The amount of time participants spend on cryptocurrency education. Reference: Jones et al.  

The narrative of financial literacy in the United States has a rich history. Benjamin Franklin is frequently ascribed with pioneering wealth advocacy, and one of his most renowned (though frequently misquoted) maxims, "A penny saved is two pence cleared," stands as an early mention of fiscal prudence in U.S. discourse.

Nonetheless, the terminology "financial literacy" seems to have surfaced relatively recently, with its earliest prominent usage in the U.S. tracing back to 1990. As the concept propagated, the U.S. administration initiated standards and methodologies to educate the populace by the early 2000s.

In the ensuing years, the count of millionaires in the U.S. surged from approximately 63,642 in 1990 to about 25 million in 2021 — an exponential increase of roughly 37,800% over three decades.

While the realm of cryptocurrency and blockchain technology matures, the population of informed investors is continuously expanding. Nevertheless, the level of crypto competence among the global populace remains comparatively deficient.

As indicated by a 2022 report by CNBC, about 57% of U.S. adults possess satisfactory financial literacy in conventional finance. Conversely, according to an informal survey undertaken by CryptoLiteracy.org in 2021, merely 4% of respondents from the U.S. exhibited comprehension of cryptocurrencies.