BIS reports on crypto prices and regulation

BIS reports on crypto prices and regulation

The Bank for International Settlement (BIS), which is basically like the mother of all central banks in the world, had been a study on the impact of cryptocurrency regulation-related news and the price variations.

The coalition of 60 central banks found some interesting things about this subject, so in this article, we will focus on some of the aspects found there.

Prices react heavily to news about regulation

Stijn Claessens and Raphael Auer, the authors of the report which you can find here, came to the conclusion that some of the news related to regulation have a strong impact on prices and they managed to measure that using an indicator called cryptocurrency regulatory news index (CRNI) which is detailed in the report. According to the paper:

Our analysis shows that despite the entity-free and borderless nature of cryptocurrencies, regulatory actions as well as news regarding potential regulatory actions can have a strong impact on cryptocurrency markets, at least in terms of valuations and transaction volumes. This suggests that at the current juncture, authorities around the globe do have some scope to make regulation effective.

News events amounting to 151 items, between the beginning of 2015 and June 2018 had been included in the report and Bitcoin, Ripple, Bitcoin Cash, Monero, ZCash, Litecoin, and Ether had been the major cryptocurrencies that had been analyzed to see how they responded to the regulatory news.

News related to bans (like the China ban) or the inclusion of cryptocurrencies under the securities laws had sparked the most negative reactions. On the second spot, were news related to terrorism financing and money laundering, combating them with a good regulatory framework.

Conclusions from the report

As the authors had stated, regulators will have the hard task of achieving a “technology-neutral regulation” and to do it “according to economic purpose rather than the technology used”. We see an uneven playing field across the globe, with countries that managed to implement a good regulatory framework, like Malta, and others still struggling with the procedures.

The report also emphasizes the importance of global coordination in terms of regulation, since a failure of that could lead to the appearance of “safe havens” for crypto-related companies. There had been actions taken by the G20 countries with this respect, but there are no actual measures taken, and also, there are many other countries besides those 20 ones that will need to join the action.