SEC New Accredited Investor Definition Could Increase Access to Certain Crypto-Related Products

The United States Securities and Exchange Commission (SEC) is looking to allow more individuals and entities to participate in private capital markets. 

The current criteria for the status of an accredited investor take into account an individual’s income and net worth. Individuals with over $1 million in net worth and $200,000 in annual income, or $300,000 in joint annual income can gain access to financial instruments including securities offerings, hedge funds, and private-equity funds.  

Gaining the accredited investor status allows entities and individuals to access to a variety of private investments, including riskier investments and hedge funds.  

According to the press release issued by the SEC, the regulator intends to add a list of new qualifications for becoming an accredited investor. The newly proposed amendment aims to expand the criteria to those “more effectively identify institutional and individual investors that have the knowledge and expertise to participate” in private capital markets.  

SEC Chairman Jay Clayton said in a statement that the existing definition only provides a “binary approach” to whether or not the individual or entity qualifies for the status.  He stated: “Modernization of this approach is long overdue. The proposal would add additional means for individuals to qualify to participate in our private capital markets based on established, clear measures of financial sophistication.” 

The proposed change would suggest an expansion in access to certain crypto-related financial products that are only available to US accredited investors. These crypto-related financial instruments include Grayscale’s Bitcoin Trust, Bitcoin Cash Trust and other funds that only allow accredited investors to participate in.  

The new amendment is now open to public comment for 60 days after the proposal is published in the official government record, the Federal Register.  

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