A Behavioral Economics Approach to Regulating Initial Coin Offerings

Nathan J. Sherman, A Behavioral Economics Approach to Regulating Initial Coin Offerings, 107 Geo. L.J. Online 17 (2018)

19 Pages Posted: 26 Sep 2018

See all articles by Nathan Sherman

Nathan Sherman

Georgetown University, Law Center, Students

Date Written: September 2, 2018

Abstract

Part I of this Note provides a brief background of cryptocurrencies and ICOs. Part II examines historical speculative bubbles and argues that the ICO market is a speculative bubble. Part III explores characteristics of those who invest in bubbles as well as the psychological biases that those investors may encounter. It presents psychological arguments for market behavior in an effort to counter the neoclassical economic claims for why a bubble cannot occur and identifies two distinct types of investors in ICOs—the smart money investors and noise traders. Part IV discusses the limited regulations currently governing the ICO market. Finally, Part V argues that an asymmetrically paternalistic regulatory scheme is the most fitting way to regulate the ICO market. Part V does not provide a comprehensive regulatory framework; rather, it argues for light-touch regulation of ICOs and offers examples for how to implement such regulation.

Keywords: Initial Coin Offering, Initial Coin Offerings, ICO, ICOs, cryptocurrency, behavioral economics, asymmetric paternalism, bitcoin, ethereum

Suggested Citation

Sherman, Nathan, A Behavioral Economics Approach to Regulating Initial Coin Offerings (September 2, 2018). Nathan J. Sherman, A Behavioral Economics Approach to Regulating Initial Coin Offerings, 107 Geo. L.J. Online 17 (2018). Available at SSRN: https://ssrn.com/abstract=3243028

Nathan Sherman (Contact Author)

Georgetown University, Law Center, Students ( email )

Washington, DC
United States

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