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Regulation does not exist to prevent people from taking risks. It exist to prevent people from buying something with a risk profile that they do not understand.

Regulation does not exist to prevent people from taking risks. It exist to prevent people from buying something with a risk profile that they do not understand. Spot cryptocurrencies are not a complex product, so very little need to protect retail from it. The risk is first order and easily understandable by retail investor. At least as much as going to a casino. What requires regation are sophisticated products where the risk/reward is more complex, such as (inverse) futures, which require understanding margining, leverage, liquiditation, etc and would be really deceptive for a retail investor. AFAIK crypto futures are already forbidden for retail in US & UK and require to be institutional/HNW with KYC. As for the token themselves, regulation is there too, there are clear distinctions for most regulator on utility, security, commodity tokens, etc.

arisAlexis 5y ago
> Spot cryptocurrencies are not a complex product. This is certainly not true. The highest ranking economists would have a month long debate on if there is intrinsic value or not and how to value their network effects and still come out with no consensus. It couldn't actually be further from the truth that these are simple instruments. The risk and utility of those are totally unknown. At least in a startup that makes EV cars you know that if they sell X cars you will get Y money.
- Galanwe 5y ago
  The valuation of the product is of course hard to predict, but that is the case for any asset. Don't get fooled, equity prices are not easier to predict than crypto currencies. But I'm not talking about valuation here, but risk profile. If a token value is at $100 and drops to $95, you lost 5%. This is intuitive and simple, there is no surprise or hidden risk. Everyone is able to understand the direct relationship between the price of the token and your portfolio valuation. For derivatives, this is not the case. Depending on your leverage, maintenance margin, etc, a 10% drop in price of the contract can mean game over you lost 100% of your stake. This is the kind of complexity that you want retail investors to be protected against.
lxgr 5y ago
> Regulation does not exist to prevent people from taking risks. It exist to prevent people from buying something with a risk profile that they do not understand. I agree, but I think the difficult question here is determining when somebody understands a risk profile. If a person, at some rational level, understands that a casino is a zero-sum game, that their real return will rapidly approach the expected return of zero the more often you bet etc., but at the same time has a pathological gambling problem, should they still be allowed to play? > The risk is first order and easily understandable by retail investor. At least as much as going to a casino. Casinos are heavily regulated in some jurisdictions for precisely these reasons.

arisAlexis 5y ago

> Spot cryptocurrencies are not a complex product. This is certainly not true. The highest ranking economists would have a month long debate on if there is intrinsic value or not and how to value their network effects and still come out with no consensus. It couldn't actually be further from the truth that these are simple instruments. The risk and utility of those are totally unknown. At least in a startup that makes EV cars you know that if they sell X cars you will get Y money.

Galanwe 5y ago
The valuation of the product is of course hard to predict, but that is the case for any asset. Don't get fooled, equity prices are not easier to predict than crypto currencies. But I'm not talking about valuation here, but risk profile. If a token value is at $100 and drops to $95, you lost 5%. This is intuitive and simple, there is no surprise or hidden risk. Everyone is able to understand the direct relationship between the price of the token and your portfolio valuation. For derivatives, this is not the case. Depending on your leverage, maintenance margin, etc, a 10% drop in price of the contract can mean game over you lost 100% of your stake. This is the kind of complexity that you want retail investors to be protected against.

lxgr 5y ago

> Regulation does not exist to prevent people from taking risks. It exist to prevent people from buying something with a risk profile that they do not understand. I agree, but I think the difficult question here is determining when somebody understands a risk profile. If a person, at some rational level, understands that a casino is a zero-sum game, that their real return will rapidly approach the expected return of zero the more often you bet etc., but at the same time has a pathological gambling problem, should they still be allowed to play? > The risk is first order and easily understandable by retail investor. At least as much as going to a casino. Casinos are heavily regulated in some jurisdictions for precisely these reasons.