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Accredited investor structures are a class-based society which I disagree with. I disagree with "if you are in the club, you get access" which seems opposed to

Accredited investor structures are a class-based society which I disagree with. I disagree with "if you are in the club, you get access" which seems opposed to the ideals of crypto in the first place. Let ordinary folks participate in the benefits of crypto, hedge funds, etc. What are the rules for accredited investors? Right now it's limited to rich people - they're not going do a subjective test on sophisticated vs unsophisticated. It's all based on wealth right now. What if I'm a comp sci PhD who really studied crypto in-depth... "nope, you're out because you're a poor student". You also imply that it's a forgone conclusion that crypto is a bad thing. People plowed money into tech stocks in 1999, which crashed in 2000/2001. In the aftermath, what if you banned investing in dotcom tech in 2003 and beyond. Google and Amazon stock is only for "qualified" investors?? Crypto could turn out to be good.

dan-robertson 4y ago
The requirements to be an accredited investor changed recently. It’s possible to be an accredited investor because of passing certain tests that are basically required for lots of people who work in finance anyway. The wealth requirements are, roughly, $200k personal income, $300k joint, or $1m net worth. The numbers look big but I think they aren’t really that high. The numbers are nominal and haven’t changed in a long time so the bar has been lowering over time. $200k income used to be a much higher bar (both in general due to inflation and on this site as income for programmers has gone up a lot in the last 20 years). If the $1m includes real estate wealth then the requirement is basically to be old and to have had a high-but-not-crazy income and bought a house somewhere where prices have gone up a lot. Every now and then there will be some news story about some unfortunate dentist who got tricked into investing into some terrible scheme or who made some other poor decisions (e.g. ‘I wanted maximum safety so I figured I’d buy bonds and I put all my money into buying bonds in this Turkish real estate developer that paid 15% that I found from a Facebook ad and now they’ve gone bust and I’ve lost all my money’) which they were only able to do due to their upper-middle-class income/wealth qualifying them as an accredited investor. So I think the rules aren’t particularly fit for purpose. Having a test is maybe better. Having an annoying process where a bunch of government officials tell you that you’ll lose all your money is a funny idea but presumably scammers are much better at learning how to walk people through that sort of thing than the government is at making it do what is intended. Having some process which takes a while might help a bit but maybe is too annoying. I think it’s also extremely false that getting rid of accredited investors gets rid of the class system that currently exists. There will still be ISDAs and relationships and so on. Even if you’re an accredited investor, you’re not going to get the opportunity to participate as an angel investor in all the best companies and you can’t phone up Goldman and get them to construct some new derivative for you to buy, so I think there’s a lot of adverse selection for someone who becomes an accredited investor but doesn’t have much to invest or many good connections. My (poor) understanding is that this is also true in crypto in that the better deals will generally be available to early investors (ie some big fund, not you) who can then dump their positions on everyone else (ie you) after some relatively short lockout. Finally, I don’t think being a ‘comp sci PhD who really studied crypto in-depth’ is actually a good example of a way to tell if someone is fit to invest in something. The qualifications are generally about understanding the financial product rather than understanding the underlying ‘business’.
xg15 4y ago
Note: > ...or prove sufficient sophistication that they really know what they're doing." You could extend the standard by other ways which don't depend on how much one owns - e.g. require people to take a test and make sure they understand the basics of the product/ecosystem they are investing in. Might also be useful to put up limits how much of your savings can be invested. But in a few $1000 play money is one thing, betting your entire life savings or your children's college fund is something else. I see it similar to driver's licenses. A driver's license is technically discriminating in the sense that it excludes everyone physically or mentally unfit to drive a car. But it does so with good reason, because attempting to drive when you're really not able to do so can have catastrophic consequences.
- DwnVoteHoneyPot 4y ago
  They're not going to do something like drivers license or a test. Right now being an "accredited" investor is solely based on wealth. Sometimes on a broker website you click a multiple choice questionnaire that says "are you sophisticated: yes or no". It's a broken system that's not going to change. Extending it is a bad idea. Nanny states are bad idea.
freetanga 4y ago
There are basic EU regulations were you need to state whether you understand the product or not - and to make sure the bank is not selling stuff you don’t understand, and that you won’t sue them claiming ignorance. Anyone can and has to do it. Bank offers free materials for you to understand what you are doing. Making sure you don’t commit financial suicide and then turn around crying “banks are bad” is, to me, a positive measure for everyone. And is free to consumers.
- DwnVoteHoneyPot 4y ago
  Yeah that sounds good. Not actually limiting people. Make them responsible for their actions. But that is not in the same spirit as other commenters mentioning "accredited investors".
wpietri 4y ago
> Accredited investor structures are a class-based society which I disagree with. This is incorrect. There are now non-wealth ways to become accredited: https://www.sec.gov/education/capitalraising/building-blocks/accredited-investor https://www.sec.gov/education/capitalraising/building-blocks... One could argue that a separate crypto exam would be useful, but I think it's better to just include it in some existing exam as another asset class. > You also imply that it's a forgone conclusion that crypto is a bad thing. I don't. Based on the trash fire of the last decade that would be a reasonable conclusion. But my point here is just that it's unregulated, and therefore has a much higher level of risk, especially to unsophisticated investors.
- DwnVoteHoneyPot 4y ago
  Seems like SEC is more reasonable with series 65. I'm in Canada. There is no non-wealth way unless employed by advisor/dealer.

dan-robertson 4y ago

The requirements to be an accredited investor changed recently. It’s possible to be an accredited investor because of passing certain tests that are basically required for lots of people who work in finance anyway. The wealth requirements are, roughly, $200k personal income, $300k joint, or $1m net worth. The numbers look big but I think they aren’t really that high. The numbers are nominal and haven’t changed in a long time so the bar has been lowering over time. $200k income used to be a much higher bar (both in general due to inflation and on this site as income for programmers has gone up a lot in the last 20 years). If the $1m includes real estate wealth then the requirement is basically to be old and to have had a high-but-not-crazy income and bought a house somewhere where prices have gone up a lot. Every now and then there will be some news story about some unfortunate dentist who got tricked into investing into some terrible scheme or who made some other poor decisions (e.g. ‘I wanted maximum safety so I figured I’d buy bonds and I put all my money into buying bonds in this Turkish real estate developer that paid 15% that I found from a Facebook ad and now they’ve gone bust and I’ve lost all my money’) which they were only able to do due to their upper-middle-class income/wealth qualifying them as an accredited investor. So I think the rules aren’t particularly fit for purpose. Having a test is maybe better. Having an annoying process where a bunch of government officials tell you that you’ll lose all your money is a funny idea but presumably scammers are much better at learning how to walk people through that sort of thing than the government is at making it do what is intended. Having some process which takes a while might help a bit but maybe is too annoying. I think it’s also extremely false that getting rid of accredited investors gets rid of the class system that currently exists. There will still be ISDAs and relationships and so on. Even if you’re an accredited investor, you’re not going to get the opportunity to participate as an angel investor in all the best companies and you can’t phone up Goldman and get them to construct some new derivative for you to buy, so I think there’s a lot of adverse selection for someone who becomes an accredited investor but doesn’t have much to invest or many good connections. My (poor) understanding is that this is also true in crypto in that the better deals will generally be available to early investors (ie some big fund, not you) who can then dump their positions on everyone else (ie you) after some relatively short lockout. Finally, I don’t think being a ‘comp sci PhD who really studied crypto in-depth’ is actually a good example of a way to tell if someone is fit to invest in something. The qualifications are generally about understanding the financial product rather than understanding the underlying ‘business’.

xg15 4y ago

Note: > ...or prove sufficient sophistication that they really know what they're doing." You could extend the standard by other ways which don't depend on how much one owns - e.g. require people to take a test and make sure they understand the basics of the product/ecosystem they are investing in. Might also be useful to put up limits how much of your savings can be invested. But in a few $1000 play money is one thing, betting your entire life savings or your children's college fund is something else. I see it similar to driver's licenses. A driver's license is technically discriminating in the sense that it excludes everyone physically or mentally unfit to drive a car. But it does so with good reason, because attempting to drive when you're really not able to do so can have catastrophic consequences.

DwnVoteHoneyPot 4y ago
They're not going to do something like drivers license or a test. Right now being an "accredited" investor is solely based on wealth. Sometimes on a broker website you click a multiple choice questionnaire that says "are you sophisticated: yes or no". It's a broken system that's not going to change. Extending it is a bad idea. Nanny states are bad idea.

freetanga 4y ago

There are basic EU regulations were you need to state whether you understand the product or not - and to make sure the bank is not selling stuff you don’t understand, and that you won’t sue them claiming ignorance. Anyone can and has to do it. Bank offers free materials for you to understand what you are doing. Making sure you don’t commit financial suicide and then turn around crying “banks are bad” is, to me, a positive measure for everyone. And is free to consumers.

DwnVoteHoneyPot 4y ago
Yeah that sounds good. Not actually limiting people. Make them responsible for their actions. But that is not in the same spirit as other commenters mentioning "accredited investors".

wpietri 4y ago

> Accredited investor structures are a class-based society which I disagree with. This is incorrect. There are now non-wealth ways to become accredited: https://www.sec.gov/education/capitalraising/building-blocks/accredited-investor https://www.sec.gov/education/capitalraising/building-blocks... One could argue that a separate crypto exam would be useful, but I think it's better to just include it in some existing exam as another asset class. > You also imply that it's a forgone conclusion that crypto is a bad thing. I don't. Based on the trash fire of the last decade that would be a reasonable conclusion. But my point here is just that it's unregulated, and therefore has a much higher level of risk, especially to unsophisticated investors.

DwnVoteHoneyPot 4y ago
Seems like SEC is more reasonable with series 65. I'm in Canada. There is no non-wealth way unless employed by advisor/dealer.