I work in fintech. I'm not sure what bank regulations you think are overzealous. To give an example, banks can legally keep you from accessing your data. Whether by blocking your screen scraping or providing an API with poor coverage.
You understand I imagine that the regulations don't use the word "unsophisticated" and as such it's a red herring. We have these (few) regulations because banks and their consumers are not entering into a business arrangement on similar footing. I'm not "too big to fail". I don't get a bailout.
Banks love to collude with one another or engage in predatory behavior, and when we repealed the Glass-Steagall act in 1999 it took less than a decade for the subprime mortgage crisis to rear its ugly head. Allowing banks to also act as securities firms will continue to show us these "once in a lifetime" economic recessions every decade or so. And would you look at that? It's been over a decade since the subprime mortgage crisis, yet here we are back in the same glut.
Crypto doesn't solve any of that. It solved double spending. Most of the "exchanges" that people are using are mixing banking and securities, and when crypto blows out there is nothing left to catch most of the retail investors that shoulder that cost. There already are so many examples that listing them is prohibitive, but I'll remind everyone that Mt Gox handled 70% of all Bitcoin transactions at the time and lost 6% of the entire Bitcoin circulation at the time to hacks. No FDIC insurance, do not pass go, do not collect $200. Laissez faire becomes laissez tomber.
I wish people were honest about why they like crypto -- it's a speculative asset in a time when most people can't afford appreciating assets, and it doesn't require an ID if you avoid exchanges so you can buy contraband. The drawbacks are someone can code a button that is difficult to inspect and if you press it your entire wallet is drained with no recourse. Haven't even touched on the energy or silicon expenditures for a system with laughably tiny adoption
You're missing the point entirely. It's not as if the regulatory landscape is only decided by regulators. The fact that we have balance in regulations is because other people push back on regulators (legislators, lobbyists, etc). This is a good balancing act, that should result in reasonably optimal regulations.
But it doesn't mean the moral hazard doesn't exist.
A definition of "adoption" would also help here. Are we counting the zero-sum game speculators as "adopters", or are we counting something like flows enabling the legally compliant exchange of goods and services in the real world?
So a “poor” but highly knowledgeable financial planner making “only” $180k a year can’t invest in their friend’s startup because the regulators deem it too risky. But some random dentist can?
There are financial criteria, or professional criteria to reach accredited investor status. In particular, any investment professional that has passed the Series 7 exam (or a few others) is an accredited investor.
That regulation seems sensible to me, and not overzealous.
The dentist can weather the poor investment. Knowledge does not make you financially solvent. It just improves your gambling odds as it relates to equity investment.
Super off topic, but the wealth gap is exacerbated by not taxing the wealthiest at a high enough rate, not regulations against capital market participation in highly speculative ventures. To argue that accredited investor regulations are the problem is no different than arguing for lottery tickets or penny stocks as an investment strategy for low income citizens.
Lotteries are super regulated though, it's (no matter the country) an utter nightmare, even stuff like a school's trinket raffle. The reason is a shitload of people making "easy profits" by frauding people.
The wealth gap isn't going to shrink by making it easy for startups (or "startups") that can't convince rich strangers (or friends and family, or crowdfunding platforms) they're worth investing in to convince larger numbers of less rich strangers to do it instead.
Most companies funded by professionals go bust and the risk adjusted returns to VC as an asset class aren't that great: the funds that have spectacular returns being balanced out by those that lose their LPs money. And few unicorns are going to be spending their effort pitching average earners for $2k cheques. Why would we expect the average joe to invest better than the pros with less capital to diversify, no board seats and substantially worse dealflow?
You're not going to find a welcoming crowd here criticizing startups on Y-Combinator news, a site written by Paul Graham and a site catering to a startup accelator's usual audience.
