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.
Bibliographical noteAcknowledgments: We are grateful for the remarks of Thorsten Sellhorn, the editor, and would like to thank two anonymous referees for their detailed and constructive feedback on the manuscript. We also thank Stephanie Cheng (discussant), Willie Choi, Ferdinand Elfers, Michael Erkens, Katharina Hombach, Wei Huang (discussant), Stephan Kramer, Jochen Pierk, Sander Renes, Jeroen Suijs, David Veenman, brownbag participants at the Erasmus University Rotterdam, and participants of
the AAA Annual Meeting 2019 San Francisco, EAA Annual Congress 2019 Paphos, FARS Midyear Meeting 2020 Nashville, and Tilburg University TiSEM Mini Conference 2019 for helpful comments.
JEL classifications: G10; G18; M41
© 2022 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group.