Bitcoin bans & regulatory segmentation in digitally native asset markets

Abstract

We examine whether regulatory barriers segment technologically integrated financial markets using Bitcoin bans across 19 countries (2013–2024). Unlike traditional markets where infrastructure creates natural frictions, Bitcoin operates on a global, permissionless network. Using proper maximum likelihood BEKK-GARCH and CCC-GARCH estimation, we find no significant differences in market integration between liberal and conservative regulatory regimes across four complementary tests. However, country-specific analysis reveals substantial heterogeneity: major markets (China, Russia) achieve partial segmentation while smaller markets show counter-intuitive increases in integration post-ban. Market size and development explain less than 10% of regulatory effectiveness variation. These findings challenge traditional segmentation theory, demonstrating that decentralized technology creates persistent cross-market linkages that transcend regulatory boundaries. The heterogeneous and often counterproductive regulatory outcomes suggest policymakers should prioritize international coordination over unilateral restrictions when addressing digitally native assets.