New York Attorney General (NYAG) Letitia James has recommended prohibiting crypto investments in defined contribution plans and individual retirement accounts (IRAs), in a letter addressed to the members of the U.S. Congress.
See related article: US senators urge Fidelity to drop BTC retirement plan after FTX collapse
Fast facts
- The letter proposes new legislation that would prevent U.S. citizens from purchasing digital assets using their funds in IRAs and other pension plans such as 401(k).
- It also seeks the rejection of two recently proposed acts – the Retirement Savings Modernization Act and the Financial Freedom Act of 2022 – that sought to allow digital asset investments for retirement funds.
- James cited four main reasons for prohibiting crypto purchases: the protection of retirement savings from digital assets, Congress’ obligation to “protect the retirement savings of America’s workers from digital assets,” the materialization of the risks posed by digital assets, and prohibiting digital assets because of a lack of intrinsic value and risk of fraud.
- The letter comes even as one third of 401(k) investors in the U.S. wished to see crypto as part of their retirement plans, according to an October survey by asset manager Charles Schwab.
- The proposal is seeking more investor protection following the FTX saga, as it also highlights Sam Bankman-Fried’s involvement in a Ponzi scheme and the exchange misappropriating user funds.
- (Corrects results of Charles Schwab survey in fourth bullet point.)
See related article: Fidelity allows retirement investments in Bitcoin