Research Suggests Transparency is Key for Utility-Based Crypto Projects

Researchers suggest that utility token issuers should provide basic levels of transparency to the public before listing on exchanges. They say that doing so may increase stakeholder confidence and attract new market participants. This is the key to crypto adoption, according to Duke University School of Law’s FinReg Blog on June 25. 

Disclosure of certain information is key for crypto performance

In the blog post, authors Nicholas J. Krapels and Dan Liebau pointed out that the majority of crypto industry experts don’t believe utility token issuers disclose enough information to their stakeholders. This could be the main reason these cryptos do not perform well in the secondary market. 

Krapels and Liebau outlined seven easy-to-follow recommendations for information disclosure that they say are relevant for utility token issuers, buyers, intermediaries, and regulators alike. 

The recommendations apply to both financial and non-financial matters. Financial details include token issuer information, initial and current cash positions, as well as token treasury information. Non-financial information includes contact information, project progress updates, documentation and open source software repositories. 

Crypto price and information correlation  

The authors based their post on a comprehensive essay, recently published on scholarly research SSRN site. The piece includes short case studies on Tezos, Hedera, Algorand, and Thorchain which highlight exemplary behaviour in the area of information disclosure. The study suggested that minimum disclosure best practices positively affect these cryptocurrency and utility token prices.

Nicholas J.Krapels, Adjunct Professor in Strategy and Entrepreneurship at SKEMA Business School, China and Dan Liebau Founding Director at Lightbulb Capital and Affiliate Faculty Member at Singapore Management University told Cointelegraph that: 

“Some would still say that "insider information" is the only way to profit in the crypto markets. Others want to propel the industry forward and be treated fairly. If you're looking for a way to promote widespread adoption of blockchain ecosystems, this is the kind of advocacy we need.”

As Cointelegraph reported previously, Oxford law researchers argued that asymmetric information may attract investors toward “pump-and-dump” schemes.