According to the results of a new research, in spite of the common suggestion that digital currencies generally work outside of the jurisdiction of national policymakers, policymaking activities do significantly affect the cryptomarkets. The research has been provided in the report from the Bank for International Settlements, which is an establishment owned by 60 central banks all over the world, which countries collectively account for 95% of the entire world’s GDP.
The data displayed in the report indicates that despite the fact that markets usually do not react to news regarding central banks releasing their own cryptocurrencies or cautioning on the use of digital currencies, they showcase a substantial reaction to announcements related to policymaking, especially concerning the legal status of digital currencies and ICOs, and also regarding the possibilities of expanding and enforcing the AML/KYC policies and CFT regulations.
The report includes four significant findings regarding the reaction of the digital currency markets to the announcements concerning policymaking and regulatory efforts.
Firstly, the markets tend to react significantly to any events connected with prohibitions, bans, or legal clashes regarding the digital currencies and initial coin offerings. As soon as it comes to decision-making connected with legal status of digital assets, markets tend to react intensively.
Secondly, news concerning the AML/KYC policies and restrictions imposed on the abilities of digital currencies to integrate with conventional financial systems because of certain regulatory efforts or lack thereof.
Thirdly, the overall warnings regarding the risks of investing in digital currency and engaging in cryptotrading have an insignificant effect on the cryptomarkets, just as in case with the news on CBDCs.
And finally, in spite of the international accessibility and functionality of the digital currencies, substantial differences in prices are still noticeable in different countries, showing that market is significantly segmented.