Crypto Market Responses to Digital Asset Policies

26 Pages Posted: 15 Oct 2022

See all articles by Alexander Copestake

Alexander Copestake

International Monetary Fund

Davide Furceri

International Monetary Fund (IMF)

Pablo Gonzalez-Dominguez

International Monetary Fund (IMF)

Abstract

We construct daily databases of crypto bans and policy statements concerning central bank digital currencies (CBDCs) to estimate their effect on crypto trading volumes for an unbalanced panel of 116 countries from November 2016 to December 2021. We find that trading volume falls by up to 72% in the week after the announcement of a ban, and by up to 25% after a CBDC supportive speech by senior central bank officials. For the strictest bans, such as that in China, this reduction persists over the subsequent quarter, driven by a reduction in trading by institutional investors. The results suggest that crypto market participants pay significant attention to government policy on digital assets.

Keywords: Cryptoassets, Central Bank Digital Currency, Regulation.

Suggested Citation

Copestake, Alexander and Furceri, Davide and Gonzalez-Dominguez, Pablo, Crypto Market Responses to Digital Asset Policies. Available at SSRN: https://ssrn.com/abstract=4248598 or http://dx.doi.org/10.2139/ssrn.4248598

Alexander Copestake (Contact Author)

International Monetary Fund ( email )

700 19th Street, N.W.
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HOME PAGE: http://copestake.info

Davide Furceri

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Pablo Gonzalez-Dominguez

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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