What we generally believe is that the cryptocurrencies do not operate under any national regulators control, but to regulatory actions actually affects crypto markets to a vast extent, according to the latest report. The Bank reported it for International Settlements (BIS), which is an organisation owned by 60 of the world’s central banks from countries progressively making up 95 percent of global GDP.
As stated in the report, the market shows notable reactions to regulatory announcements about the legal status of cryptocurrencies and initial coin offering (ICO) tokens. It also responded towards possible expansion and implementation of KYC, CFT and AML regulations.
There are four significant results given about the response of crypto markets to regulatory actions and announcements, in the report.
First, among them, crypto markets were detected to respond most remarkably to the ban and restriction related news and updates. They also responded to the news and events that concern actions regarding the legal status of crypto assets or if the news questions about securities regulation. Though, it also says that the market responds positively too !! For instance, the market reacted positively to the news about possible new legal frameworks designed to accommodate cryptocurrencies and ICOs.
Apart from that, the second thing that creates an impact on the crypto market is regarding the regulatory news of AML/CFT measures and restrictions, as it directly connects with crypto’s capacity to combine with traditional financial systems. News that confirms about a denial or an approval on crypto exchange within a regulated financial system generates quite a lot impact on the market.
With this, it was also found that the generalized warnings about possible risks attached with cryptocurrencies do not matter to the market. The market generally ignores the non specific news. It didn’t show any change even when EU suppressed Estonia’s bid to issue a national cryptocurrency.
Even though the cryptocurrency is a globally traded asset, the price varies because of different regulations existing in different countries. It proves that there is a prominent level of market segmentation.
An expert form the report elaborates by saying, “These results suggest that cryptocurrency markets rely on regulated financial institutions to operate and that these markets are segmented across jurisdictions, bringing cryptocurrencies within reach of national regulation. […] Because they rely on regulated financial institutions to operate and markets are (still) segmented across jurisdictions, cryptocurrencies are within the reach of national regulation.”
As this report assesses the intraday impact of regulatory news events first on the price of cryptocurrencies and other aspects of the cryptocurrency markets. It affirms that the regulations can influence cryptocurrency in a desirable way.