• SEC definition of an accredited investor to include knowledge-based criteria rather than just money-based criteria

The United States Securities and Exchange Commission (SEC) has proposed to change the definition of an accredited investor to include anyone with professional knowledge, experience, or certifications in the financial sector.

Essentially, an individual can now become an accredited investor based on their level of financial intelligence, unlike the current definition of an accredited investor which is based on money alone, requiring an individual to have USD 1 million of net worth and USD 200,000 of yearly income to become accredited.

The current money-based definition of an accredited investor is essentially tantamount to financial discrimination, since even the most brilliant financial genius cannot participate in private security offerings, private equity funds, and hedge funds if they do not have the required amount of money to gain accreditation. This actually makes it even harder for people who are not accredited to ever gain enough money to become accredited, since their opportunities are limited by the law.

Even in the crypto space there are products which are only available to accredited investors including the Grayscale Bitcoin Trust and the Grayscale Ethereum Trust, Bitwise’s Private Index Fund, and Galaxy Digital’s Bitcoin Funds.

It may take several months for this proposed definition change to become law, but when it does happen institutional investment products in the crypto space will become available to a wider spectrum of United States residents.

 

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