Financial market regulators globally are often criticized for being slow to adapt to new market dynamics, but the United States Securities and Exchange Commission (SEC) may just have pulled off a case of exemption that will potentially benefit anyone who is betting on the continued growth of the country’s cryptocurrency and blockchain ecosystem.
On Wednesday, the SEC announced the release of a new proposal that will amend the age-long definition of the accredited investor.
The accredited investor definition is what describes which individuals can participate in buying and selling investment products and securities that are not listed on the public U.S markets, such as a stock exchange.
Per the SEC’s soon to be amended definition, an accredited investor is a natural person whose individual net worth, or joint net worth with that person’s spouse, exceeds $1,000,000. Another qualification could be the person having income at least $200,000 each year for the last two years (or $300,000 combined income if married), and the expectation to make such high income over the coming year.
Banks, private business development companies, and other entities with total assets above $5,000,000 also qualify as accredited investors.
Until now, only entities in this bracket can purchase private securities include crypto tokens, which the SEC has often flagged as unregistered securities.
What is the Proposal?
The U.S SEC proposes to expand the definition of an ‘accredited investor’ within an eye on increasing access to investments for individuals and organizations that, until now, did not fall into that prestigious bracket.
The goal, as per the SEC announcement, is to add new categories of natural persons that may qualify as accredited investors based on their professional knowledge, experience, or certifications. Provision will also be made to list entities that may qualify as accredited investors by, among other things, allowing anybody that meets an investment test to qualify.
To cut the story short, the current proposal would increase the number of people allowed to invest in assets that the SEC initially considers risky for the ‘common investor,’ a class that the cryptocurrency industry undoubtedly falls into.
What’s in for Crypto With Accredited Investor Definition Amendment
It would be pertinent to note that the crypto and blockchain industry will not be the only sector to benefit if the SEC receives the needed public backing for its proposal to amend the accredited investor definition.
Still, the emerging space may benefit more than any of its counterparts if the SEC’s move materializes.
Given the continued progress being made by U.S crypto startups to raise funds for their firms using compliant regulatory mechanisms, a definition amendment could open up these emerging companies to receive funding from a larger pool of investors than ever before.
The amendment would also erase certain aspects of the SEC continually labeling the sale of crypto tokens to the ordinary investors as violations of the States securities law. Instead, the focus would now be solely fixed on token issuers not registering their offering with the regulator.
Another primary benefit could be opening up Bitcoin and crypto-related products to a broader pool of investors. For instance, the Grayscale Bitcoin Trust (GBTC), which until now specifically caters to accredited investors, will now be open to a wider pool of investors.
Conclusively, there is no denying that the crypto space would benefit significantly from any positive amendment to the ‘accredited investor’ definition, in the same way, that every other industry will.
The downline, however, is that the current development has come at a critical moment for the young industry, and maybe the catalyst it needs to reach mainstream acceptance, and perhaps welcome more investors than it ever has since it came unto the global scene.