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Cryptocurrency regulation and stock market performance

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  • Wang, Xiaoya
  • Wang, Yuchuan

Abstract

This study examines the impact of China’s 2021 cryptocurrency regulatory policy on stock market liquidity and volatility using a difference-in-differences approach. The findings reveal that the regulation significantly enhances stock market liquidity and volatility, demonstrating a clear cross-market spillover effect from digital assets to traditional capital markets. Further heterogeneity analysis shows that these effects are stronger in regions with higher levels of financial development, among state-owned enterprises, and within high-tech industries, highlighting the moderating roles of institutional environments and firm characteristics. Our findings not only deepen the theoretical understanding of the interplay between digital financial regulation and capital markets but also suggest that regulatory policies should account for regional disparities in financial development and firm-type heterogeneity to improve their precision and effectiveness.

Suggested Citation

  • Wang, Xiaoya & Wang, Yuchuan, 2026. "Cryptocurrency regulation and stock market performance," Finance Research Letters, Elsevier, vol. 98(C).
    • Handle: RePEc:eee:finlet:v:98:y:2026:i:c:s1544612326003697
    DOI: 10.1016/j.frl.2026.109839
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