Developing central bank digital currencies: a reality check during cryptocurrency euphoria

Iulia Cioroianu, Shaen Corbet, Charles Larkin and Les Oxley

Economics and Business Letters, 2023, vol. 12, issue 2, 105-114

Abstract: Using estimated sentiment indices based on CBDC-related social media posts, and testing for the effects of regulatory-related announcements upon blockchain and cryptocurrency-related funds, this research presents two key findings: first, the continued evolution of the pricing structures of digital finance products to respond to such perceived threats constitutes a further evolutionary point in the product's life-cycle. However, secondly, the very fact that returns fall while volatility increases, indicates a largely negative market response to the threat of potential external regulation of cryptocurrencies in the future. The nature of this negative response validates concerns that anonymity continues to be a central attractive feature for cryptocurrency stakeholders, further verifying the necessity for third-party oversight.

Date: 2023
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