The Impact of Cryptocurrency Regulation on Trading Markets

62 Pages Posted: 13 Jul 2020 Last revised: 4 Feb 2021

See all articles by Brian D. Feinstein

Brian D. Feinstein

The Wharton School of the University of Pennsylvania

Kevin Werbach

University of Pennsylvania, The Wharton School, Legal Studies & Business Ethics Department

Date Written: 2020

Abstract

Some policymakers and scholars view cryptocurrencies as conduits of illegality and fraud, which therefore should be tightly regulated. Others warn that regulation could simply cause trading activity to cross borders into less-regulated jurisdictions—or even smother a promising new financial asset class. To assess these claims, we assemble original data on cryptocurrency regulations worldwide and use them to empirically examine global movement in trading activity following key regulatory announcements. A wide variety of models yields almost entirely null results. These findings call into question the notion that capital flight should be a first-order concern when designing a regulatory regime for cryptocurrencies.

Keywords: cryptocurrencies, cryptocurrency trading, regulation, bitcoin, capital flight, digital assets, securities regulation

JEL Classification: E42, F31, G12, G14, G15, G18, G28, K22, O38

Suggested Citation

Feinstein, Brian D. and Werbach, Kevin, The Impact of Cryptocurrency Regulation on Trading Markets (2020). Available at SSRN: https://ssrn.com/abstract=3649475 or http://dx.doi.org/10.2139/ssrn.3649475

Brian D. Feinstein (Contact Author)

The Wharton School of the University of Pennsylvania ( email )

3730 Walnut Street
Suite 600
Philadelphia, PA 19104-6365
United States

Kevin Werbach

University of Pennsylvania, The Wharton School, Legal Studies & Business Ethics Department ( email )

3730 Walnut Street
Suite 600
Philadelphia, PA 19104-6365
United States
215-898-1222 (Phone)

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