Cryptocurrency regulation and market quality

Todd Griffith and Danjue Clancey-Shang

Journal of International Financial Markets, Institutions and Money, 2023, vol. 84, issue C

Abstract: We examine the effects of the 2021 Chinese cryptocurrency ban on several aspects of crypto market quality, namely, prices, volatility, and liquidity. We find that average crypto prices plunge and liquidity deteriorates, while volatility spikes in response to the announcement of the ban. While the volatility surge is short-lived, the fall in crypto values and liquidity persists. The results are robust across dollar trading volume sorts, and remain significant after taking into account the inter-connectedness between the market quality measures in a vector autoregressive framework. We present the results in comparison with the 2017 Chinese cryptocurrency ban, which did not result in the same broad changes in the crypto market. We also discuss the potential household ownership and environmental implications of the ban.

Keywords: Cryptocurrency regulations; Cryptocurrency market quality; Environmental impacts (search for similar items in EconPapers)
JEL-codes: G12 G14 G18 G28 Q5 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:84:y:2023:i:c:s1042443123000124

DOI: 10.1016/j.intfin.2023.101744

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