Just as important as what a regulation says is who it applies to.

Take financial regulation. A great idea! American could use some. But — as the cryptocurrency world forcibly reminded us — it’s not always easy to figure out when someone is doing something “financial.”

So let’s come up with a test. Here’s one: “If a transaction involves a million dollars or more, financial regulations apply to it.” Not every million-dollar transaction is “financial” but there are few enough of these that filing the “worth a million bucks, but not financial” paperwork for them won’t be a huge deal. Besides, anyone moving a million dollars around can afford professional help in navigating the paperwork.

But that could change. Let’s say that hyperinflation results in a massive devaluation of the dollar, to the point where your kid’s weekly allowance is more than a million bucks, as is the cup of coffee you buy for a friend on your lunch-break.

At that point, we’d need a new test. Getting allowance and buying a coffee are not financial. Nearly everyone involved in these transactions is unfamiliar with financial regulations and burdening them with the need to learn these rules is unfair.

Failing to adjust the test for regulatory salience isn’t just unfair, it’s unworkable. Financial regulation is complex — it has to be, because the industry it regulates is also complex. If we want people outside that industry to understand and conform it its contours dozens of times per day, we’ll have to drastically simplify its rules, until it is no longer fit for regulating finance. A failure to do this will ensure that everyday people, doing everyday things, are forever on the wrong side of the law.

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