On 23rd September, the Bank for International Settlements [BIS], released its quarterly review for 2018, on cryptocurrencies. In the document, authors Raphael Auer, Principal Economist in the Monetary Policy unit [BIS], and Stijn Claessens, Head of Financial Stability Policy department [BIS], discuss the market behavior of Bitcoin [BTC] and other cryptocurrencies.
The report stated that cryptocurrencies are considered to be “out of reach” of the national regulation. The document stated that the notion seems to be wrong. The report revealed that the valuation of cryptocurrencies, transaction volumes and user bases react notably to news about the “regulatory actions”.
According to BIS, cryptocurrencies like Bitcoin [BTC] and Ethereum [ETH] have received a greater response and attention from the audience due to its “meteoric price swings”. However, it stated that the same has raised many concerns among the regulatory bodies.
The BIS draws a distinct line between regulatory concerns regarding cryptocurrencies and other digital asset classes and emerging technologies. It stated:
“But what sets cryptocurrencies apart is that they can function without institutional backing and are intrinsically borderless. This raises the question of whether one can expect regulation – in particular, national regulation – to be effective.”
To answer those concerns, the BIS tries to evaluate the effects of several regulatory actions or news of such actions on the cryptocurrency market. Raphael Auer said:
“To answer this question, we built a dataset of regulatory news events and systematically value whether the cryptocurrency markets react to the regulatory news. we do find that there is a strong reaction of prices and transaction volumes.”
The document stated that BIS first assessed the impact of regulatory news on the number one cryptocurrency, Bitcoin [BTC]. It added that the analysis was later conducted on other cryptocurrencies and other elements of the cryptocurrency market.