The new Research has found that, despite this notion of cryptocurrency generally operate outside the reach of National regulators, Regulations have had a huge impace on crypto markets. The research presented by the Bank of Settlements (BIS) directs our attention to how cryptomarkets is indirectly influenced by the regulatory actions. BIS, an organisation owned by the 60 percent of world’s Central banks of the nations contributing to 95 percent of the Global GDP.
In the report, while it shows how Crypto market do not respond generally to the news about central banks creating their own digital currencies or issuing general non-specific warnings about cryptocurrencies, they show a significant response to the regulatory announcements regarding the legal status of cryptocurrencies and Initial Coin Offering (ICO) tokens, as well as the possible expansion and enforcements of KYC, AML and CFT regulations.
According to the report, four major finding are established in the cryptomarket regarding the regulatory actions and announcements.
The Cryptocurrency markets were most importantly responded to the news and reports concerning bans, restrictions and legal battles over cryptocurrencies and ICOs. Where as the news in question directly concerns regulatory decisions or actions regarding the legal status of crypto assets, the market responded very strongly.
The issues specifically surrounding security regulations, such as the ongoing ambiquity regarding the United States SEC’s pending decision on whether to permit a Bitcoin Exchange Traded Fund (ETF). But this does not effect negitavely, as according to the report, the market is more optimistic towards the new regulatory reforms and upcoming legal frameworks for adopion of cryptocurrency specifically designed to accomodate the cryptocurrencies and ICOs.
Second, The Anti Money laundering and Conter Terrorist Funding (AML/CFT) measures and restrictions on crypto’s ability to integrate with the traditional banking financial systems due to regulatory actions and non-actions has affected the market negatively. On the contrary, new about the allowance of the Crypto startups to engage with the regulated financial organisations, such as The New Yorks BitLicence Application has a positive impact on the market.
The non-specific general warnings about the dangers of investing into cryptocurrencies has a negative effect on the market. The same holds true for the announcements by the financial regulators and Central bank announcing their own plans about launching their own digital currency (CBDC). Markets generally ignore such announcements, maybe because this is an era of an open marketplace. This can be seen when the market slapped down Estonia’s announcement of bidding the National Digital Currency. This had no negative or positive impact of anykind on the cryptomarkets, as did the Venezuela’s plan to launch the state sanctioned cryptocurrency based on their crude oil reserves.
The report suggests that, despite Crypto’s trans-border accessibility and functionality, significant price differences are still noticeable across juristictions. This indicates a significant level of market segmentation. This phenomenon states that the Cryptocurrency markets at this point of time rely on the regulated financial systems.
Download the report here.
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