Regulating Cryptocurrencies: Assessing Market Reactions

15 Pages Posted: 30 Nov 2018

See all articles by Raphael Auer

Raphael Auer

Bank for International Settlements (BIS)

Stijn Claessens

Bank for International Settlements (BIS)

Date Written: September 1, 2018

Abstract

Cryptocurrencies are often thought to operate out of the reach of national regulation, but in fact their valuations, transaction volumes and user bases react substantially to news about regulatory actions. The impact depends on the specific regulatory category to which the news relates: events related to general bans on cryptocurrencies or to their treatment under securities law have the greatest adverse effect, followed by news on combating money laundering and the financing of terrorism, and on restricting the interoperability of cryptocurrencies with regulated markets. News pointing to the establishment of specific legal frameworks tailored to cryptocurrencies and initial coin offerings coincides with strong market gains. These results suggest that cryptocurrency markets rely on regulated financial institutions to operate and that these markets are segmented across jurisdictions, bringing cryptocurrencies within reach of national regulation.

JEL Classification: E42, E51, F31, G12, G28, G32, G38

Suggested Citation

Auer, Raphael and Claessens, Stijn, Regulating Cryptocurrencies: Assessing Market Reactions (September 1, 2018). BIS Quarterly Review September 2018. Available at SSRN: https://ssrn.com/abstract=3288097

Raphael Auer (Contact Author)

Bank for International Settlements (BIS) ( email )

Stijn Claessens

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

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