My paper with K. Shakhnov on Regulation spillovers across cryptocurrency markets is now available on FRL at this link authors.elsevier.com/c/1bjLs5VD4Kcw… (with 50 days free access) #EconTwitter [thread 1/n]
In this paper we look at the unprecedented drop in trading volume on the Chinese cryprocurrency market after a significant regulatory change that de facto banned bitcoin in early 2017 in China [thread 2/n]
We find large spillovers of this regulatory shock on other cryptocurrency markets: 1) we observe a large increase in trading volume for bitcoin vs. Korean won, Japanese yen and U.S. dollars; ... [3/n]
... 2) for these pairs, we also observe an increase in their relative price vs other pairs (ie, discounts measured as bitcoin prices using different fiat or crypto pairs widened); ... [4/n]
... 3) trading volume on Chinese peer2peer exchanges also increased, as control of these exchanges is harder for the regulator [5/n]
Our results suggest that domestic regulators trying to control the diffusion of cryptocurrencies (think Libra, or use of bitcoin in EM countries) should take into account the effects of changes in foreign regulations on domestic markets [6/n]
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