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Into the ether or the state? Legibility theory and the cryptocurrency markets

In this article, the authors explore why there is substantial cross-national variation in the level of regulatory clarity surrounding cryptocurrencies and what explains these differences.

Miles Kellerman and Jack Seddon
05 February 2024
Read the full article here

There is substantial cross-national variation in the level of regulatory clarity surrounding cryptocurrencies. What explains these differences? And, more broadly, what drives the divergent historical development of market regulation in different jurisdictions? To answer these questions, Kellerman and Seddon present a new conceptual framework centred on the concept of market legibility. This term, inspired by the sociological literature, refers to the extent to which markets are made legible to the state through standardisation.

The authors contend that state supply of, and market demand for, legibility drives the primary political-economic dynamics of market regulation. Specifically, these factors combine to produce ideal type states of legibility that correspond to both distinct stages of market development and the relative level of regulatory clarity in any one jurisdiction. This framework is utilised to conduct a comparative historical analysis of cryptocurrency regulation in the EU, US, UK, and Japan. These case studies demonstrate how the concept of market legibility can help the readers to understand these political-economic dynamics. Despite sharing common characteristics such as highly developed financial markets and established processes of regulatory consultation, cryptocurrency markets in these countries exhibit differences in the order and pace at which they proceeded through stages of (il)legibility.

This article also advances the literature on legibility and provides a novel application of the concept to market governance. By performing these tasks, this article corrects the common assumption that states are constantly striving to impose their authority on unwilling markets. It demonstrates instead that state and private actor preferences to make markets legible vary, conditioning, in turn, the political economy of regulatory governance.

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