Global Bitcoin Markets and Local Regulations

30 Pages Posted: 5 May 2020

See all articles by Cyn-Young Park

Cyn-Young Park

Asian Development Bank

Grace Tian

Asian Development Bank

Bo Zhao

University of Hong Kong - Faculty of Business and Economics; International Monetary Fund

Date Written: Jan 3, 2020

Abstract

Since the launch of Bitcoin in 2009, the spectacular rise and fall of cryptocurrencies and the underlying blockchain technology have attracted global attention. While the application of distributed ledger technology presents great economic and business potential, significant volatility and speculative trading of cryptocurrencies have raised concerns over investor and consumer protection and prompted government interventions within their respective jurisdictions. This study focuses on the six Bitcoin trading markets comprising 99% of global trading volume as of February 2018. Adopting the event study methodology to newly compiled information about local regulation events, we find that the effect of government regulations on the Bitcoin price is only short-lived, but regulations discourage trading activities for a longer term in local markets. Interestingly, however, the repressive effect of domestic regulations on trading activities can be mitigated by the domestic financial market openness. Together, these findings are consistent with the view that Bitcoin markets are globally integrated and that, to uphold market integrity, international cooperation would be essential.

Keywords: Bitcoin, cryptocurrency, financial market openness, international cooperation, regulation

JEL Classification: E61, G10, G14, G18

Suggested Citation

Park, Cyn-Young and Tian, Shu and Zhao, Bo, Global Bitcoin Markets and Local Regulations (Jan 3, 2020). Asian Development Bank Economics Working Paper Series No. 605, Available at SSRN: https://ssrn.com/abstract=3590919 or http://dx.doi.org/10.2139/ssrn.3590919

Cyn-Young Park

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines
(632) 632-5473 (Phone)

HOME PAGE: http://www.adb.org

Shu Tian (Contact Author)

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

Bo Zhao

University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong

International Monetary Fund ( email )

700 19th St NW, Washington
Washington, DC 20036
United States

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