What disclosures do investors in crypto assets want to have? (We surveyed them and asked)
What investors want to know when they invest in or hold crypto is a question critical to financial regulation and ensuring market integrity. In the securities law context, it helps define what information is “material,” and even in other domains shapes what institutions and other regulators believe should or should not be required to disclose. Plus it provides clues into the depth of sophistication and risk tolerance of particular investors.
But, even with its centrality, and despite all the hearings, debates, and yes, lawsuits — surprisingly, no one has asked the question.
It’s why I’m especially delighted to have worked with Broadridge whiz kids Robert Krugman, Aaron Miller, and Aviad Stein, to begin the process of getting some answers. After devising research parameters, we roped in True North Market insights to conduct a survey, querying 2000 retail investors in the US, Canada and the UK and asking them to identify and rank which data points they felt were most important when they invested in crypto assets. We then wrote up a report, which you can find here, disaggregating responses along regional and other lines.
What we found in the data was extremely interesting.
As one might assume, respondents stressed the importance of understanding cryptocurrency risks and security, along with project financials. However, towards the bottom of list of preferences were cryptocurrency-specific factors like network and platform activity, the perspective of the core team and tokenomics. Which in the latter case is surprising given its centrality in determining how quickly and to what degree new tokens are minted and positions correspondingly diluted.
There is a range of different possible explanations but given the importance of these issues in understanding the value proposition of crypto assets, it may mean that legacy disclosure obligations in traditional finance leave quite an impression, and more work may need to be done in educating holders and regulators about what factors drive prices in crypto markets.
Another question we asked involved where people get their information, with crypto websites dominating the list — even beyond broker dealers and exchanges. White papers, meanwhile, were the least depended on, which could suggest that their technical nature and inaccessibility could stymie their usefulness as disclosure mechanisms. Or that the information in them is quickly outdated.
Which brings up another question — namely how often people wanted to have updated information. Current securities law demands annual and quarterly disclosures, with a list of information requiring disclosure subject to certain specified events. However, just under half of respondents indicated that they would like to receive monthly or quarterly information updates, with another 27.6% preferring to be updated as information changes. Only 8% of respondents in the U.S., 12% of respondents in Canada, and 9% in the U.K. preferred updates only once a year.
The report is intentionally short and to the point—like the ideal disclosure! — but packed with graphs and data. Our goal was to add meaningful substance to the overall conversation about what reform should look like in order to optimize trust and informational efficiency in crypto markets. Hopefully, you’ll find that we succeeded.