Regulation and Risk in Decentralised Finance: An Event Study of DeFi Tokens

Abstract

This study investigates the influence of major regulatory interventions on decentralised finance (DeFi) token markets by conducting an event study of six high-profile announcements issued between 2023 and 2025. The analysis reveals that these interventions primarily lead to risk-sensitive, token-specific price adjustments rather than systemic disruptions across the broader DeFi ecosystem. While enforcement actions trigger asymmetric and delayed volatility effects, legal clarity alone does not stabilise liquidity conditions. Notably, governance and decentralised exchange (DEX) tokens exhibit heightened sensitivity to enforcement actions and policy signals, underscoring the role of protocol function in regulatory risk transmission. These results contribute to the literature on market microstructure in decentralised ecosystems and offer practical insights into liquidity formation, volatility persistence, and differentiated risk management within emerging fintech infrastructures.