The Impact of Regulations on ICO Performance

In this paper, approaches to Initial Coin Offering (ICO) regulation are explored and described. The impact of some of the regulative initiatives, infrastructural, business and IT-related factors on the short-term performance of ICOs is assessed through the application of event study methodology. To provide the basis for the analysis, a general explanation of blockchain and distributed ledger technology (DLT) is provided. The data on the global ICO market is consolidated and an overview of the ICO results, geography and efficiency is provided. The challenges of gathering information on the coin offerings for the event study and choosing a proper model for expected return are addressed and a number of approaches are discussed. A basic framework for ICO sampling is derived. Cumulative returns from two short-term event windows of 30 and 90 days after the ICO are estimated and used as dependent variables for separate linear regressions. The interpretation of the results of the analysis shows that certain regulatory restrictions can affect the cumulative abnormal returns with statistically significant coefficients. Implications for future policies on ICOs are outlined in the Discussion section, as well as limitations of the work and suggestions for further research.