Dallas Fed study finds cryptocurrency prices react substantially to some types of regulatory news

A report published by the Federal Reserve Bank of Dallas has found that cryptocurrency prices and trading volumes react substantially to news about actions by regulators.

The greatest negatives effects come from: 1) news related to general bans on cryptocurrencies, 2) news on actions to strengthen anti money laundering (AML) and to strengthen the combating the financing of terrorism (CFT), and 3) on news restricting the use of cryptocurrencies.

The greatest positive effects come from news from regulators pointing to the creation of novel legal frameworks for cryptocurrencies and initial coin offerings (ICOs).

The report found that unspecific warnings by regulators had not price effect on cryptocurrencies. Similarly news about central banks potentially issuing their own digital currencies (Central Bank Digital Currencies or CBDCs) had no effect.

The report was written by Raphael Auer and Stijn Claessens.

These findings came from studying 151 regulatory news events – most the events being in China, India, Japan, the UK and the USA.

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Categorized as US