How Disclosure and Information Intermediaries Strengthen the Credibility of Initial Coin Offerings

The crypto-tokens market has recently emerged as an alternative source of financing for entrepreneurial ventures, with approximately $27 billion raised globally through March 2022.[1] These ventures issue blockchain-based digital “crypto-tokens” to raise external capital through an initial coin offering (“ICO”). In return, a token provides holders with various benefits, such as “utility” value through access to the venture’s current or future product (or service), potential participation in future profit distributions, and the ability to trade the token on crypto-exchanges (e.g., Binance and Coinbase).

The “ICO” designation is inspired by initial public offering (“IPO”) whereby private firms list shares on … Read more

The Role of Disclosure in the Unregulated Crypto Market

Our new research paper studies the issuers of unregulated crypto-tokens such as EOS and Tether. We examine two dimensions: the success of the Initial Coin Offering (ICO) process, and the capital market patterns following the listing of the tokens on exchanges. Specifically, we study how these issuers signal their quality to investors, and how their disclosure practices affect market quality.

Crypto-tokens are different from crypto-currencies such as Bitcoin, which serve as a medium of exchange like fiat currencies. Instead, crypto-tokens are sold by “virtual organizations” that want to raise capital for their projects through initial coin offerings (ICOs), which are … Read more