House Agriculture Committee meeting today on cryptocurrency revealed to me several things. The first is the sentiment around cryptocurrency is positive and bullish which it great. The next is that regulators are coming in and unfortunately I think the framework will benefit the already wealthy. The sense that I get is that the legal framework will be drafted in such a way that only accredited investors will be able to participate in ICO’s which will fall under the SEC under the false guise of protecting the average or retail investor and once it hits the regular exchange somehow the risk is gone and now retail investors can buy at a lower risk and it should be regulated as a commodity and not a security.
My problem with this mindset is that the definition of an accredited investor will exclude probably 90% if not more of American citizens and in my opinion a lot of average people are actually more knowledgeable about this space than so called accredited investors. Let’s be honest this space is risky and the majority of us I assume realize this, and have decided to take these risk. When you lose money you will learn from your mistakes and become smarter I certainly did. The risk of buying a crypto asset post ICO in my opinion holds the same risk of going to zero as it did pre ICO especially if everything is still on a testnet, but the benefit has now been greatly reduced. So how is this beneficial to average retail investor? The answer is that is not beneficial at all so let’s stop pretending this is about general public protection rather than preservation of great financial opportunities for a select group.
If we want to use the retail investor protection argument then I think we should add a few more stipulations if we truly are trying to protect the general public. I would add that all ICO participant coins/tokens should be frozen and non transferrable until a working product is available and audited not just a prototype. This would ensure retail investors significantly lower their risk of investing in pure scam projects and at the same time ensure “accredited investors” can’t just dump a hyped project on non-savvy investors for significant gains as soon as their lock up period ends, because quite frankly the same risk still exist if a project is still being built post ICO but is being traded on an exchange.
Education is the great equalizer. I wholeheartedly believe that governments have an obligation to do their due diligence to protect its citizens and I also believe they have an obligation to make sure their citizens have access to great opportunities. Now whether an individual takes advantage of these opportunities is entirely up to them. I can get onboard with limiting ICOs to accredited investors but let’s have a conversation about redefining what an accredited investor is. If the whole premise of accredited investors are that they are more financially savvy then we can agree on lets increase the knowledge of a retail investor. My proposal would be that for a person that doesn’t currently meet the financial requirements of an accredited investor by the SEC. That the SEC create a registered course that can be done online or even at a university that the general public can register for and attend where they are thought about finances and risk and at the end of the course the should receive a certificate of participation which would allow them to also be classified as an “accredited investor”. If a person takes the initiative to do these things I think it’s safe to say they have evaluated their risk and now they should reap the benefits or consequences.
