Conventional regulation still has impact on cryptocurrencies, report says

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Regulation still has a large impact on the cryptocurrency market, according to the latest research report of the Bank for International Settlements (BIS).

BIS is an international financial institution owned by 60 central banks of BIS is 60 central banks or financial management authorities.


The report said that for the central banks to create their own cryptocurrency or issue non-specific warnings about cryptocurrency, the marketplace usually did not have a significant reaction. However, it would be significantly affected by some regulatory policies, such as a cryptocurrency’s legal status.

“While cryptocurrencies are often thought to operate out of the reach of national regulation, in fact their valuations, transaction volumes and user bases react substantially to news about regulatory actions,” the report’s key findings say.

“News pointing to the establishment of legal frameworks tailored to cryptocurrencies and initial coin offerings coincides with strong market gains.”

The report finds there are three major aspects to the relationship between cryptocurrency market and regulatory actions and announcements:

1. The Bitcoin market has the most significant response to related events such as cryptocurrency, ICO restrictions and prohibition. If the news directly involves regulatory decisions or the legal status of cryptographic assets, the market’s response is usually strong. Specifically, the price of Bitcoin always affects the entire marketplace, including the other major coins: Ethereum, Ripple, NEO, etc.

This also includes matters of securities regulators, such as the SEC’s pending ambiguity about the Bitcoin ETF. For example, to establish positive news for Bitcoin and cryptocurrency and ICO new legal framework, the market will respond actively. Despite on stablecoins Tether USDT which react accordingly to the market trend, nor the price.

2. Regulations on anti-money laundering or counter terrorism financing measures, and regulatory news restricting the integration of cryptocurrency and traditional financial systems have also had a significant impact on the market.

Cryptocurrency exchanges are often denied access to banking services in the formal financial system — such messages have a significant negative impact on local market. However, news about cryptocurrency startups in corroboration with regulated financial institutions, such as an exchange or company successfully licensed under New York BitLicense, will have a positive impact.

3. The impact of non-specific warnings about cryptocurrency investment and trading risks on the market is almost negligible. Financial regulators and central bank’s issuance plans of cryptocurrency that have little impact on the market.

Markets generally ignore such news either is good or bad. For example, the European Union earlier cracked down Estonia’s plan to issue national cryptocurrencies — the market apparently had no negative response. Meanwhile, Venezuela introduced Petro coin backed by oil reserve that was recognized by the country — the market did not react actively, either.

(figure 2) The impact of Bitcoin news messages among bitcoin price history

 

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