Does banning cryptocurrencies affect stock markets?

Abstract

Purpose

This paper aims to investigate the impact of banning cryptocurrencies on stock markets.

Design/methodology/approach

The paper uses an event study approach and data from stock market indices in nine countries that imposed a ban. It uses the constant mean model and the market model, with two different benchmarks for global returns, to analyze if any of the stock indices show abnormal returns on or around the announcement of a cryptocurrency ban.

Findings

The analysis shows that banning cryptocurrencies did not affect the returns of stock markets in any of the countries studied, indicating that the cryptocurrency market and stock markets are decoupled from each other, or the ban was not effectively implemented.

Originality/value

To the best of the author’s knowledge, this paper is the first to explore the potential spillover effect of a cryptocurrency ban on stock markets. It also bridges two strands of literature: the relationship between cryptocurrencies and traditional assets, and the impact of cryptocurrency regulation on their returns.

Citation

Elroukh, A.W. (2024), "Does banning cryptocurrencies affect stock markets?", Studies in Economics and Finance, Vol. 41 No. 5, pp. 998-1011. https://doi.org/10.1108/SEF-08-2023-0506