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Global Bitcoin Markets and Local Regulations

Author

Listed:
  • Cyn-Young Park

    (Asian Development Bank)

  • Shu Tian

    (Asian Development Bank)

  • Bo Zhao

    (Asian Development Bank)

Abstract

Since the launch of Bitcoin in 2009, the spectacular rise and fall of cryptocurrencies and the underlying blockchain technology have attracted global attention. While the application of distributed ledger technology presents great economic and business potential, significant volatility and speculative trading of cryptocurrencies have raised concerns over investor and consumer protection and prompted government interventions within their respective jurisdictions. This study focuses on the six Bitcoin trading markets comprising 99% of global trading volume as of February 2018. Adopting the event study methodology to newly compiled information about local regulation events, we find that the effect of government regulations on the Bitcoin price is only short-lived, but regulations discourage trading activities for a longer term in local markets. Interestingly, however, the repressive effect of domestic regulations on trading activities can be mitigated by the domestic financial market openness. Together, these findings are consistent with the view that Bitcoin markets are globally integrated and that, to uphold market integrity, international cooperation would be essential.

Suggested Citation

  • Cyn-Young Park & Shu Tian & Bo Zhao, 2020. "Global Bitcoin Markets and Local Regulations," ADB Economics Working Paper Series 605, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0605
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    References listed on IDEAS

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    Cited by:

    1. Lee, Jangyoun & Oh, Taehee, 2022. "The Kimchi premium and bitcoin-cashing outlets," Finance Research Letters, Elsevier, vol. 50(C).

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    More about this item

    Keywords

    Bitcoin; cryptocurrency; financial market openness; international cooperation; regulation;
    All these keywords.

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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