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Regulation spillovers across cryptocurrency markets

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  • Borri, Nicola
  • Shakhnov, Kirill

Abstract

Several countries have already introduced restrictions on trading of cryptocurrencies, and many more are evaluating whether to follow suit. We document an unprecedented drop in trading volume on the Chinese cryptocurrency market after a recent regulatory change by the Chinese authorities that severely restricted bitcoin trading. This paper shows how changes in domestic regulation not only have large effects on the domestic cryptocurrency market but also produce large international spillovers. Specifically, we observe a large increase in trading volume and relative bitcoin prices in exchange for Korean won, Japanese yen, and U.S. dollars, and on Chinese peer-to-peer exchanges.

Suggested Citation

  • Borri, Nicola & Shakhnov, Kirill, 2020. "Regulation spillovers across cryptocurrency markets," Finance Research Letters, Elsevier, vol. 36(C).
    • Handle: RePEc:eee:finlet:v:36:y:2020:i:c:s1544612319307470
    DOI: 10.1016/j.frl.2019.101333
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Copestake, Alexander & Furceri, Davide & Gonzalez-Dominguez, Pablo, 2023. "Crypto market responses to digital asset policies," Economics Letters, Elsevier, vol. 222(C).
    2. Raphael Auer & Marc Farag & Ulf Lewrick & Lovrenc Orazem & Markus Zoss, 2022. "Banking in the shadow of Bitcoin? The institutional adoption of cryptocurrencies," BIS Working Papers 1013, Bank for International Settlements.
    3. Cao, Guangxi & Xie, Wenhao, 2021. "The impact of the shutdown policy on the asymmetric interdependence structure and risk transmission of cryptocurrency and China’s financial market," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).
    4. Fairouz Mustafa & Suman Lodh & Monomita Nandy & Vikas Kumar, 2022. "Coupling of cryptocurrency trading with the sustainable environmental goals: Is it on the cards?," Business Strategy and the Environment, Wiley Blackwell, vol. 31(3), pages 1152-1168, March.
    5. Daniele Bianchi & Mykola Babiak, 2021. "A Factor Model for Cryptocurrency Returns," CERGE-EI Working Papers wp710, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    6. Arpaci, Ibrahim, 2023. "Predictors of financial sustainability for cryptocurrencies: An empirical study using a hybrid SEM-ANN approach," Technological Forecasting and Social Change, Elsevier, vol. 196(C).
    7. Ajithakumari Vijayappan Nair Biju & Ann Susan Thomas, 2023. "Uncertainties and ambivalence in the crypto market: an urgent need for a regional crypto regulation," SN Business & Economics, Springer, vol. 3(8), pages 1-21, August.
    8. Jalan, Akanksha & Matkovskyy, Roman & Urquhart, Andrew & Yarovaya, Larisa, 2023. "The role of interpersonal trust in cryptocurrency adoption," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 83(C).
    9. Jinxin Cui & Aktham Maghyereh, 2022. "Time–frequency co-movement and risk connectedness among cryptocurrencies: new evidence from the higher-order moments before and during the COVID-19 pandemic," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-56, December.
    10. Lee, Jangyoun & Oh, Taehee, 2022. "The Kimchi premium and bitcoin-cashing outlets," Finance Research Letters, Elsevier, vol. 50(C).
    11. Yousaf, Imran & Yarovaya, Larisa, 2022. "The relationship between trading volume, volatility and returns of Non-Fungible Tokens: evidence from a quantile approach," Finance Research Letters, Elsevier, vol. 50(C).
    12. Luca Mungo & Silvia Bartolucci & Laura Alessandretti, 2023. "Cryptocurrency co-investment network: token returns reflect investment patterns," Papers 2301.02027, arXiv.org, revised Jan 2023.
    13. Gradojevic, Nikola & Tsiakas, Ilias, 2021. "Volatility cascades in cryptocurrency trading," Journal of Empirical Finance, Elsevier, vol. 62(C), pages 252-265.
    14. Cao, Guangxi & Xie, Wenhao, 2022. "Asymmetric dynamic spillover effect between cryptocurrency and China's financial market: Evidence from TVP-VAR based connectedness approach," Finance Research Letters, Elsevier, vol. 49(C).
    15. Rehman, Mobeen Ur & Katsiampa, Paraskevi & Zeitun, Rami & Vo, Xuan Vinh, 2023. "Conditional dependence structure and risk spillovers between Bitcoin and fiat currencies," Emerging Markets Review, Elsevier, vol. 55(C).
    16. Daehan Kim & Mehmet Huseyin Bilgin & Doojin Ryu, 2021. "Are suspicious activity reporting requirements for cryptocurrency exchanges effective?," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-17, December.

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    More about this item

    Keywords

    Bitcoin; Trading volume; Regulation; China;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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