Capping downside diminishes opportunities for emergence

By capping downside, you limit the evolutionary search space. A short term win in preventing downside may lop off whole evolutionary branches that could contain massive upside.

This tradeoff might be worth it, but it's hard to ever know, because the immediate win of capping downside is concrete, while the missed opportunities are counterfactual.

One alternative may be soft security, because it allows for permissionless innovation.