by Steven Anderson
Originally published at paymentweek on October 10, 2018.
For those familiar with investment, you’ve likely run into the “accredited investor” concept. This concept actively keeps many investors out of certain investments, from initial releases of stock to certain cryptocurrencies and beyond. While this is done ostensibly to “protect” investors of lower wealth, the end result is often that the best potential opportunities are preserved for the wealthiest investors. The Virtuse exchange, who stepped in at Blockfest Asia and dropped word our way, looks to address this discrepancy in an otherwise free market.
Commonly, accredited investors become that way by having a net worth of over $1 million, and have earned over $200,000 a year for two years prior to seeking accreditation. The US recently added a further way to become accredited: having a work history in investments that demonstrates understanding of the field. However, word from Early Investment says that fewer than three percent of all Americans will actually meet that criteria, meaning its impact is minimal at best.
The Virtuse exchange, meanwhile, allows users to effectively build their own financial instruments and invest as they wish, without the need for pricey intermediaries whose only function is to address the accreditation rules. The exchange will allow users to create Digital Asset Collateralized Tokens, which allows said users to invest in futures, commodities and more by allowing ownership of an asset contained in the Virtuse system via an Ethereum blockchain.
By cherry-picking certain classes of investment and declaring them off limits to any but a handful of people represents a very serious problem. While certainly, these investments are riskier than the ordinary–and those planning to make investments therein accordingly should know that and recognize the risks–keeping them fenced off and treating the common investor like an infant playing around a hot stove doesn’t represent a truly free market. While there is some value in improving transparency, and making it clear these investments are perhaps the highest-risk around, outright forbidding doesn’t seem like the right plan.
That’s what makes Virtuse noteworthy here; if it can actually work around the accreditation rule and open up the field, then it may have made one major stride forward. That will almost certainly draw attention and get a lot of people routing cash through it.