Regulation by enforcement: the impact of Securities and Exchange Commission enforcement actions on crypto valuation

Václav Brož

Studies in Economics and Finance, 2024, vol. 42, issue 3, 489-509

Abstract: Purpose - This paper aims to examine the impact of enforcement actions by the US Securities and Exchange Commission (SEC) on the valuation of major crypto assets. Design/methodology/approach - Given the recent increase in regulatory efforts to combat fraudulent activity within the market, the paper concentrates on the period from 2019 to 2023 and uses the event study approach. Findings - The analysis reveals a negative and economically significant effect of SEC actions on crypto valuations, ranging from −0.7% to −1.4% over a three-day window surrounding the announcement of enforcement actions for the entire sample. Particularly, a pronounced negative reaction is observed from crypto investors to SEC enforcement actions in 2022 and those where individuals are charged. Originality/value - The findings align with existing literature, even though the study uses more conservative methodological approaches and data selection criteria. Specifically, the author uses a market event study model, account for potential confounding events, and use initial news reports about investigations rather than official SEC communications as event dates.

Keywords: Market efficiency; Event study; Financial markets; Asset pricing; Cryptocurrency; Regulations and political economy; C32; G12; G14; G18 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:sefpps:sef-07-2024-0429

DOI: 10.1108/SEF-07-2024-0429

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