You can put money in crypto, though. Buy Bitcoin, buy Ethereum, there are plenty of ways to put your money in crypto.
Here New York is going after companies like Nexo that pretend like their risky crypto product is just like a bank account that happens to pay higher interest. Look how they advertise it on https://nexo.io/ -
ISO 27001:2013 Compliant. Impeccable risk assessment, data protection, and enhanced cybersecurity
$375 million insurance on all custodial assets
Earn daily interest on your crypto
Add or withdraw funds at any time
Personally, I find these to be misleading statements. You can't necessarily add or withdraw funds at any time because you depend on Nexo's solvency which is not guaranteed like it is for a bank account, their risk assessment in my opinion is not impeccable, et cetera.
If Nexo is going to pretend they are as risk-free as a bank account, then it seems reasonable for New York to regulate their statements like they regulate bank accounts.
For all those who try to compare this to subprime, there's two big differences here. First, decentralized lending is enforced by smart contract -> the banking apps dont take credit risk because they can auto liquidate defaulter's assets and collect a 10-20% liquidation fee for doing so. Second, decentralized lending apps max out at 60% LTV. People are either going to be safe and do 30-40% leverage which protects against 33-50% drops in the value of the collateral, or they are going get liquidated at 60%. There's no too big to fail here.
Right. What part of "Ponzi scheme" did you not understand?
This has nothing to do with "crypto". This is the same scheme as Madoff's. It's almost the same scheme as John Law's bank of 1720. There's not much innovation in scams. Just new forms of obfuscation.
Of course the corporation/vendor of the scammy investments will fold at that time, but the management will have long since pulled their money out and will be largely unpenalized, leaving tax payers to fund the bail out.
That's not to say accredited investors don't get government bailouts when they play it to close to the fire, they do. The bailout is just done quietly in the background and nobody is the wiser...
Exactly: being wealthier just means you can make bigger bets. It's rather common for athletes to go bankrupt after retirement.
However, an accredited investor might just be someone who got rich through inheritance, i.e., not at all through their own doing, so I don't think that accredited investors necessarily know more about investing. They can, in theory, weather a loss more, depending how much they bet, although AFAIK there are not restrictions on them betting it all.
People are allowed to buy lottery tickets. They are also allowed to bet it all at a casino. Why shouldn't someone be able to put even a small amount of money in crypto? Maybe it pays off for them, maybe it doesn't (just like lottery / casino / etc., and I think they have a better chance in crypto).
That said I don't really like centralized crypto lenders like Celsuis, Nexo, etc. If anything, I think people have a better chance just buying crypto at spot price and not lending it out, although if someone really was set on lending out their crypto, they are better off with the decentralized lending alternatives.