Study: Crypto value strongly tied to regulatory news

Activity from regulators has a big impact on the status of cryptocurrencies, a new report has indicated, with prices shown to correlate with regulatory decisions.

The study was conducted by the Bank for International Settlements, and discovered that news addressing the treatment of crypto under securities laws and widespread bans of virtual currencies have the biggest impact on the value of crypto itself.

Cryptos such as Bitcoin saw the strongest market gains from reports addressing legal frameworks around ICOs and the sector more generally.

The report reads: “Our analysis shows that despite the entity-free and borderless nature of cryptocurrencies, regulatory actions as well as news regarding potential regulatory actions can have a strong impact on cryptocurrency markets, at least in terms of valuations and transaction volumes. This suggests that at the current juncture, authorities around the globe do have some scope to make regulation effective.”

News on how the use of crypto in money laundering and terrorist activities can be tackled was also close to the top of the list of topics that could impact the crypto space, as well as the interoperability of crypto with regulated markets.

“New types of crypto-products, such as crypto-funds and derivatives on cryptocurrencies and cryptoassets, create additional linkages with the financial system,” the report concludes. “And cryptocurrencies and other cryptoassets can piggyback on the conventional financial system.

“A loss of public trust in cryptoasset markets could translate into distrust in the broader financial system and its regulators. While cryptoassets thus do not, at this point, pose a global financial stability risk, it is important to remain vigilant, monitor developments and respond to potential threats.”