Last week, the Federal Reserve Bank of Dallas published a working paper entitled “Cryptocurrency Market Reactions to Regulatory News.” The 18-page report is an updated version of a paper by the same authors previously published by the Bank of International Settlements (BIS). It is co-authored by Raphael Auer, principal economist at the BIS, and Stijn Claessens, the BIS’ Head of Financial Stability Policy and Deputy Head of the Monetary and Economic Department.
The Federal Reserve Bank of Dallas has published a paper showing how cryptocurrency markets are affected by crypto regulatory actions. The research also determines whether the authorities have some scope to make cryptocurrency regulation effective.
Influencing Cryptocurrency Markets and Prices
The paper explores the effects of regulatory actions on cryptocurrency markets. The researchers found that the markets respond “most strongly to news events regarding the legal status of cryptocurrencies.” News of general bans on crypto use, whether cryptos are securities, whether they will not be treated as a currency, or strict AML/CFT measures have strong adverse impacts. News indicating possible legal frameworks for cryptocurrencies or initial coin offerings (ICOs) “coincides with strong market gains.”
How regulatory actions affect the price of bitcoin.
Some regulatory announcements, however, do not affect cryptocurrency markets. According to the study:
Authorities’ unspecific general warnings have no effect, nor does news regarding the likelihood of central bank digital currency (CBDC) issuance.
Research Suggests Room for Effective Regulation
For their paper, Auer and Claessens identified 151 regulatory news events, most of which were in China, India, Japan, the U.K., and the U.S. They assessed the intraday impact of these events on the price of bitcoin as well as the prices of other cryptocurrencies and other aspects of the crypto markets.
“Overall, our analysis suggests that, at the current juncture, there is scope to apply regulations,” they believe. “It also indicates that regulation need not be bad news for the markets, with price responses notably signaling a clear preference for a defined legal status, albeit a light regulatory regime.” The researchers concluded:
At the current juncture, authorities around the globe do have some scope to make regulation effective.
Cryptocurrency News From Japan: March 1-7 in Review
This week’s headlines from Japan include crypto exchange Zaif reopening account registrations, government agencies meeting on crypto, the Federation of Economic Affairs submitting a national Blockchain proposal, Coincheck adding Qtum, and Rakuten Wallet opening leverage trading account registration.
Check out some of this week’s crypto and blockchain headlines, originally reported by Cointelegraph Japan.
Zaif crypto exchange reopens account registration after hack
Japanese crypto exchange Zaif opened its doors once again for new account registrations, starting on March 6.
Hackers pilfered more that $63 million in crypto from the platform in 2018. After the hack, the company announced deposit and withdrawal suspension on Sept. 20, 2019.
Zaif also joined forces with a crypto exchange named FISCO in February 2020.
Japanese government agencies hold meeting on crypto
Japan’s National Police Agency, Financial Services Agency, and Consumers Affairs Agency came together for a Feb. 28 gathering on cryptocurrency exchanges and their contractors.
The entities discussed exchange checkups, contractors, communication with unregistered parties, and public notices.
Japanese Federation of Economic Affairs proposes a national Blockchain plan
Japan’s Federation of Economic Affairs and the Japan Blockchain Association, proposed a national blockchain strategy to the country’s internet technology, economy, trade, and industry ministers.
The strategy lists multiple use cases, calling Blockchain a “key technology for digital transformation,” which is “necessary to promote public-private partnership as a national strategy in the next era of the internet.”
The plan suggests creating a council focused on putting Blockchain to work for public and private partnerships. The strategy also notes expected government actions, including the formation of a game plan for the technology, as well as conducting regulatory and supervisory activities.
Coincheck adds Qtum to its exchange
Crypto exchange Coincheck unveiled plans to add crypto asset Qtum (QTUM) to its platform on March 12. Coincheck will offer customers trading and lending capabilities around Qtum.
Qtum joins a list of 11 other digital assets available on the exchange.
Rakuten wallet opens leverage trading accounts
One of technology giant Rakuten Inc.’s daughter companies, Rakuten Wallet, unveiled margin trading account registration. Customers can now open margin trading accounts on the platform and utilize 2x leverage.
Rakuten offers margin trading capabilities for Litecoin and XRP, in addition to its Bitcoin, Ethereum and Bitcoin Cash leverage trading options.
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