Investor Reactions to Crypto Token Regulation

European Accounting Review, Forthcoming

45 Pages Posted: 21 Mar 2019 Last revised: 21 Jun 2022

See all articles by Jeroen Koenraadt

Jeroen Koenraadt

The London School of Economics and Political Science

Edith Leung

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Date Written: May 14, 2021

Abstract

Despite calls for regulation in the crypto utility token market, it is unclear how crypto token investors value current regulatory proposals. We find that on average, investors react negatively to news that increases the likelihood of securities and transparency-related regulation. We also find that this negative reaction is attenuated for tokens rated higher on quality and transparency by intermediaries, those that have higher levels of disclosure, and listed on more liquid exchanges. The observed variation in token transparency and this muted reaction suggest investors perceive disclosure costs to be lower for tokens in more transparent environments, suggesting that transparency matters to investors.

Keywords: Regulation, Transparency, Cryptocurrencies, Crypto Tokens, ICOs, Financial Markets

JEL Classification: G10, G18, M41

Suggested Citation

Koenraadt, Jeroen and Leung, Edith, Investor Reactions to Crypto Token Regulation (May 14, 2021). European Accounting Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3339197 or http://dx.doi.org/10.2139/ssrn.3339197

Jeroen Koenraadt (Contact Author)

The London School of Economics and Political Science ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Edith Leung

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

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