Cryptocurrency Consumer Behavior: Decision-Making and Risk Analysis

This report delves into consumer behavior within the cryptocurrency market, analyzing decision-making processes through the lens of established consumer behavior theories like the Engel Kollat Blackwell model. It identifies various risks associated with cryptocurrency use, including business, cyber, operational, regulatory, and market risks, and discusses mitigation strategies such as regulatory approval, alliances with trusted organizations, structural mitigants, mature ecosystems, and robust risk management frameworks. The report also explores the impact of consumer motivation, culture, and perception on cryptocurrency adoption, highlighting factors like the desire for fast transactions, avoidance of bank fees, and the hope for long-term value storage. Recommendations include increased awareness campaigns by the FCA and strategic planning to foster greater trust and acceptance of cryptocurrency.

Consumer Behaviour

PART A
1. Engel Kollat Blackwell model:
Engel Kollat Blackwell is a model of consumer behaviour which was developed for purpose of
increasing, growing body of knowledge that is related to consumer behaviour (Chu and Chen,
2019). This model helps for revision to improve descriptive ability of relationship among
component as well as subcomponent. This model can be implemented in context of
Cryptocurrency which consist four stage that are mentioned below:
Information input stage: It is one of stage which helps consumer to get information from
different source like marketing and non marketing source which create influence over problems
recognition stage of decision making process. In process of buying cryptocurrency, consumer is
not making a specific decision in order to search for external information that will be activated
for making a choice. At time of buying cryptocurrency, consumer needs to search for various
information in market.
Information processing stage: It is another stage of consumer buying decision in which
consumer is paying attention, acceptance, retention, exposure to information. At time of buying
cryptocurrency, consumer is paying attention to information and taking it for long term memory.
Decision process stage: It is one of important stake in decision making process of consumers as
in which problem is recognised by consumer and they search for alternatives and also evaluate
different alternatives in order to buy a product. In this stage, consumers of cryptocurrency is
making decision with following different steps.
Variable influencing decision process: It is one of stage which influence individual as well as
environment that create impact over different stages of decision making (DeWall and Van
Tongeren, 2021). Individual has different characteristic like motives, values, life style as well as
personality. Social influence is one culture, family as well as references group. It create influence
over financial condition and decision making process of consumer.
2(a). Identification and discussion of risk involved in cryptocurrency use
Business risk: Cryptocurrency is related to digital currency which is related to uncertainty.
Online platform id generating different trading activity with speculation of seeking profit from
short term as well as long term of holding of digital currency (Huang and Lu, 2017).
Cryptocurrency is not one which is backed with central bank, international and national

organisation where values can be determined with values of market participation place through
transaction. It results in loss of confidence which getting of collapse in different trading activity
and also result in drop in values of these currencies.
Cyber risk: Cryptocurrency is considered as cash currency as it has attracted large set of
criminal community. These criminals are breaking into crypto exchange and drain crypto wallets
as well as infect individual computers with different malware which steals into cryptocurrency. It
increase for users of these currency as it consist cyber risk.
Operational risk: Centralised clearing house are guaranteeing validity of different transaction
which comes with ability to make reverse of monetary transaction in a coordinated manner with
no ability that is possible to cryptocurrency.
Regulatory risk: There are some countries which preventing use of currency and also consider
transaction break as many laundering regulation (Huarng and Yu, 2019). Due to these
complexity as well as decentralise nature of digital currency , no significant numbers of
participants are exist.
Market risk: There is also a market risk is associated with trading of cryptocurrency. There are
finite amount of current in this which make is suffer from concern of liquidity and also posses
limited ownership that can be susceptible in market manipulation.
2(b). Discussion of ways in which cryptocurrency buyers are mitigating risk in consumer buying
process
There are different ways in which a person can mitigate risk associated with cryptocurrency.
These methods helps business to reduce risk and also build more confidence and trust of people
on currency transaction (Kautish and Sharma, 2020). These methods helps to increase acceptance
of these cryptocurrency in today world. Some of these methods for mitigating risk are mentioned
below:
Regulatory Approval: There are various material risk associated with cryptocurrency which is
creating challenges for business and in order to overcome of these risk, regulatory approve is
required. As cryptocurrency is decentralise currency which does not have any regulatory
governance and regulatory framework. If there are some regulatory approval can be
implemented, it can helps to improve acceptance and credibility of cryptocurrency.
Alliances and acceptance and adoption of trusted global organisation: There are embrace of
new technology which helps them to offer differentiation to customers with offering support to

digital currency and to customers. Cryptocurrency helps to enhance reputation and also leads to a
culture which is full of technology innovation. It is providing greater accountability towards
consumer for gaining knowledge, enhance reliability of cash exchange, offering affordable level
of consumer protection improve availability.
Structural mitigants: In order to mitigate risk of cryptocurrency, it is important make reserve
requirement for exchange. Enhancement of ecosystem can be more robust in cryptocurrency
exchange. These are organisation which helps individual who are interest in trading a traditional
currency for cryptocurrency (Mathew and Soliman, 2021). In traditional method of
cryptocurrency exchange not only work as an exchange but also as a broker dealer. In case, if
exchange are holding a specific among of reserve for purpose of surviving downstream, same
principle is adopted by clearing house.
Mature ecosystem: Use of cryptocurrency is increasing enormously and also increasing ability
of consumer to increase harness power of technology. Increasing use of mobile phone in
emerging market also increase transferability, knowledge and well as technological know how.
There is increasing use of digital payment with rise of internet baking. So, advancement of
technology can also increase acceptance of cryptocurrency.
Risk management framework: In order to mitiagate risk, it is important for develop a risk
management framework (Reimers and Shiller, 2019). A standard risk management framework
is one which helps to cover different policies, procedure and standards related to fraud, cyber,
physical security assets and operational credit. This f5tamwork to be at enterprise wide level
which correlated risk with each other. In order to effective and actionable, risk framework needs
to be supplemented in large parts with real time information that can be gathered and also
scenario planning.
PART 2
2. Cryptocurrency decision making process with support of consumer decision making theories
Consumer decision making refers to a process through which consumer select an appropriate
products among different alternatives. This model consist different steps which is adopted by
buyers in order to solve problems and satisfying needs of consumers. It consist different steps
which is to be followed by consumer while buying cryptocurrency.

Needs and problem recognition: Process of consumer decision making start with identification
of needs or problems faced by consumers (Slater and Flora, 2019). There are internal ans
external stimulus drive consumer to believe that there is something missing and also motivate
them to looking for a solution in order to solving these problems. In this step, customers feel
needs of buying cryptocurrency which is important for them.
Information search: Next stage of consumer decision making process consist information
search where consumer is paying high attention in order to solve problems (Wang and Kim,
2019). For this, they start gathering information about solution or products and service that can
satisfy their needs. In order to gather information, consumer is using different source where they
can get relevant information. In order to make a decision, in this stage, customers are gathering
information about cryptocurrency which helps them to gather different information.
Evaluation of alternatives: With collection of information from different source, customers in
next stage can evaluate benefits as well as disadvantage of different alternatives of products and
also develop different choice related to brands, stores and attributes of products which can be
suitable to needs, lifestyle, taste and preference of customers.
Selection: After analysing different choices, customers make their choice of product trial, They
can buy products in different quantities as per their requirement. It is important process where
they are making a choice.
Purchase decision: It is another stage in which customers is believing selected products and
service will provide best solution to their problems and needs and allow them to make actual
purchase. It consist different steps like making a product choice, brand choice as well as time and
among of purchase. In this step, customers can actually buy cryptocurrency.
Consumer motivation, culture and perception in relation to concurrency use:
The decentralised digital currency which is stored in the form of online and not turns down under
the control of financial institutions and government is defined as cryptocurrency. This type of
study has an aim of getting and understanding the knowledge of users as well as their motivation
while using this process through structured interviews. The emerging fintech, Cryptocurrency
provides a large number of opportunities but also posing some challenges and drawbacks.
Consumers are motivated to use this process as they have faith that because of advancement in
technology public will use cryptocurrency in future instead of using fiat currencies. The process
of cryptocurrency permits the consumer in conducting the transactions in a fast way. The main

motivation of customer-base is the hope of getting a luxurious life so that they can see digital
currency and use it to make their transactions fast. Cryptocurrency gives an important advantage
to overcome from the lack of social trust as well as by extending the reach to fiscal services.
Because they are considered as a way to aid the process of growth in those countries that are still
developing through expanding financial inclusion and offering a healthy traceability. Consumers
perception in relation to cryptocurrency states that they use this process in helps them in making
the payments in a quick mode. The process also facilitates the customer-base in avoiding
transaction fees that is charged by banks. Some people carry cryptocurrency as an investment
because they hope that the values will go higher in nearby future. Another perception of market-
share in relation to cryptocurrency is that they desire for a long-duration and reliable value store
(Wolske and Stern, 2018). Most of the cryptocurrency have restricted supply that is crowned
by mathematical algorithms. This strategy makes the process possible for any government body
or political agency to cut their value by the process of inflation. The general public is now taking
keen interest ion cryptocurrency because it is showing the potential for growth of long-duration.
They understand that it is the most likely as well as least risky process and becomes the sound
reason to invest in the cryptocurrency. The process provides assistance to public in eliminating
the requirement to pay an extra amount on transaction fees. Through this process, the transaction
fees which is paid by an individual gets reduced to zero or negligible amount. Cryptocurrency
ensures more confidential transactions as it includes checking on the account balances to
ascertain that there are sufficient funds are available or not.
Recommendation
 From above mentioned discussion, it can be recommended that FCA should increase
mass awareness for digital currency like cryptocurrency. People have lack of awareness
for use of these digital currency and in order to increase its use, it is important for FCA to
increase awareness.
 FCS should also needs to also conduct strategic planning which helps them to develop
different goals and objectives in market which is important in order to get success in
market.
 It is also suggested to FCA to comply with different laws and regulation which is
important for them to increase use of cryptocurrency.

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