BIS Claims Crypto Markets “React Substantially” to Legal News, Says Crypto Isn’t as Decentralized As We Think

Bitcoin enthusiasts will tell you that bitcoin is great because it lies outside of the regulatory control of centralized corporations, banks, and governments. A new report from BIS, however, shows that governments have substantial control over the price of bitcoin because crypto markets “react substantially” to regulatory news.

The report comes from the Bank of International Settlement, often referred to as the “central bank’s central bank.” You can view the full report, entitled, “Regulating cryptocurrencies: assessing market reactions,” here.

Here’s how the report begins:

“Cryptocurrencies are often thought to operate out of the reach of national regulation, but in fact their valuations, transaction volumes and user bases react substantially to news about regulatory actions.”

Cryptocurrency advocates frequently praise the industry for being an investment safe from government decision-making and regulatory policy. The BIS report, however, suggests otherwise.

The report also found that certain types of regulatory decisions had a particularly devastating impact on market prices:

“The impact depends on the specific regulatory category to which the news relates: events related to general bans on cryptocurrencies or to their treatment under securities law have the greatest adverse effect, followed by news on combating money laundering and the financing of terrorism, and on restricting the interoperability of cryptocurrencies with regulated markets.”

All three of these news topics push the price of cryptocurrency downward.

Meanwhile, other news stories push the price upward:

“News pointing to the establishment of specific legal frameworks tailored to cryptocurrencies and initial coin offerings coincides with strong market gains.”

In other words, regulatory decisions and governmental institutions can have a profound impact on cryptocurrency markets, even though crypto advocates claim that their coins are out of the reach of government authorities:

“These results suggest that cryptocurrency markets rely on regulated financial institutions to operate and that these markets are segmented across jurisdictions, bringing cryptocurrencies within reach of national regulation.”

Why This is a Problem for Crypto Advocates

The BIS report may be a problem for crypto advocates.

It’s often argued that bitcoin is better than gold as a store of value because the government can’t just seize gold – something it famously did in the 1930s. The government can’t seize your bitcoin the same way, could it? Well, the government wouldn’t have to seize your bitcoin: they could just make policy decisions that ban bitcoin or restrict its use, causing prices to plummet and destroying your store of value.

Of course, optimists will see this report as more FUD: it doesn’t tell us anything we don’t know. It’s obvious that government decisions – like the SEC’s rejection of a bitcoin ETF or the Chinese government’s decision to ban bitcoin – will affect crypto markets.

Regardless of government decisions, one thing will always remain true: 1 BTC will always equal 1 BTC. You will always be able to store BTC with private keys. You’ll always be able to transfer BTC without the need for a centralized institution. This is the core value of bitcoin that allows it to continue to have value regardless of centralized policymaking.

The Report Discusses Four Main Findings on Regulatory News and Cryptocurrency Prices

BIS came to four main conclusions about cryptocurrency markets and how they react to regulatory news:

  • First, markets respond most strongly to news events regarding the legal status of cryptocurrencies
  • Second, regulatory news regarding anti-money laundering/combating the financing of terrorism measures and limits on the interoperability of cryptocurrencies with the regulated financial system “adversely impacts cryptocurrency markets”
  • Third, authorities’ unspecific general warnings about crypto “have no effect, nor does news regarding the likelihood of central bank digital currency (CBDC) issuance)
  • Fourth, large price differences sometimes prevail across jurisdictions, suggesting market segmentation across the crypto industry.

“Overall, our analysis suggests that, at the current juncture, there is scope to apply regulations, if so decided. And it also indicates that regulation need not be bad news for the markets, with price responses notable signaling a clear preference for a defined legal status, albeit a light regulatory regime.”

Proof that Crypto Prices Are Affected by Regulatory News

BIS backs up its statements with facts. BIS mentions, for example, a number of news stories that significantly affected crypto prices.

In March 2017 the SEC rejected a bitcoin ETF proposal from Cameron and Tyler Winklevoss. That proposal would have created the first US-based exchange traded fund for bitcoin. In the five minutes surrounding the announcement by the SEC, the price of bitcoin dropped an incredible 16%.

A similar drop was seen in June 2018 when Japan’s Financial Services Agency (FSA) ordered six cryptocurrency exchanges to improve their money laundering procedures. Prices tanked shortly thereafter.

The BIS report publishes graphs showing the price drops surrounding each announcement.

Conclusion: Cryptocurrencies Aren’t As Fully Decentralized As We Think

Ultimately, crypto critics are taking the BIS repot to suggest that cryptocurrencies aren’t as decentralized as we think: cryptocurrencies are affected by centralized decision makers. Cryptocurrencies need to move through regulatory pathways in order to reach the market. We rely on exchanges to move cryptocurrencies, and those exchanges need to abide by certain regulations.

As BIS concludes:

“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.”

Get Free Email Updates!

*Action* Enter Best Email to Get Trending Crypto News & Bitcoin Market Updates

I will never give away, trade or sell your email address. You can unsubscribe at any time.

Bitcoin Exchange Guide News Team
B.E.G. Editorial Team is a gracious group of giving cryptocurrency advocates and blockchain believers who want to ensure we do our part in spreading digital currency awareness and adoption. We are a team of over forty individuals all working as a collective whole to produce around the clock daily news, reviews and insights regarding all major coin updates, token announcements and new releases. Make sure to read our editorial policies and follow us on Twitter, Join us in Telegram. Stay tuned. #bitcoin

[Alert] Use the author's self-conducted information at your own risk, do you own research, never invest more than you are willing to lose.

[Disclosure] The published news and content on BitcoinExchangeGuide should never be used or taken as financial investment advice. Understand trading cryptocurrencies is a very high-risk activity which can result in significant losses. Editorial Policy \\ Investment Disclaimer


Please enter your comment!
Please enter your name here


Live Bitcoin Price & Latest BTC Charts

Today's Latest Crypto News

Deregulating Bitcoin May Increase Speculative Trading Instead of Technical Innovation: Japan’s New Top Financial Regulator

Ryozo Himino, the new top financial regulator of Japan, wants the country to take caution over promoting digital assets, arguing that instead of promoting...

Goldman Sachs New Digital Asset Manager Reveals Plans to Bring A ‘Digital Token' to the Bank

U.S. financial giant Goldman Sachs is pushing forward its plans to launch a digital asset with the appointment of its new digital asset...

Grayscale Ethereum Trust Files with SEC to Halve the ETHE Locking Period Same as GBTC

Grayscale Investments has publicly filed a registration statement on Form 10 with the US Securities and Exchange Commission (SEC) on behalf of its Ethereum...

Florida Teenager Behind the Infamous Crypto Twitter Hack Pleads Not Guilty to 30 Counts of Fraud

Graham Ivan Clark, the 17-year old Florida teenager accused of being the main culprit of the most significant privacy breach in Twitter’s history, has...

Bitmain’s Management Feud Is Finally Affecting Business Operations; AntMiners Shipments Delayed

Bitmain’s top-level struggles cause a three-month delay in Antminer hardware. Two mutually exclusive solutions offered to customers. The constant wrangling within the largest Bitcoin...

BitcoinExchangeGuide is a hyper-active daily crypto news portal with care in cultivating the cryptocurrency culture with community contributors who help rewrite the bold future of blockchain finance. Subscribe on Google News, see the mission, authors, editorial links policy, investment disclaimer, privacy policy. Got News? Contact us, we are human too. Note: nothing here is financial advice, do your own research thoroughly.

Start Using Crypto Today