New York AG pushes to ban crypto purchases by pension funds – Rayrice Forex News

New York AG pushes to ban crypto purchases by pension funds

The turmoil surrounding crypto exchange FTX and Sam Bankman-Fried (SBF) has reaffirmed regulators’ belief in the need for stricter regulation around the crypto ecosystem. New York Attorney General (NYAG) Leticia James has urged a ban on crypto investments in defined contribution plans and individual retirement accounts (IRAs) in an effort to protect investors from a similar collapse.

In a letter to members of the US Congress, James called for legislation that would prevent US citizens from using their money in IRAs and defined contribution plans like 401(k) and 457 plans to buy cryptocurrencies and digital assets. However, an October 2022 survey found that nearly 50% of US investors would like to see crypto as part of their 401(k) retirement plans.

James also vetoed two acts — the recently proposed Retirement Savings Modernization Act and the Financial Freedom Act of 2022 — that would have allowed investments in digital assets. Given the SBF’s involvement in Ponzi Schemes and misappropriation of users’ funds, James outlines four main reasons behind her call to exclude digital assets from IRAs and defined contribution plans, as detailed below.

First, the NYAG points to the importance of protecting retirement savings over the long term. Second, she highlighted Congress’ historic obligation to protect American citizens’ retirement funds. James used narratives including fraud and lack of adequate safeguards as a third reason for banning crypto investments. The final concern was around volatility and uncertainty in custody and evaluation.

On the other hand, NYAG explained that there is a difference between digital assets and blockchain technology. She believes that US citizens should be allowed to buy shares of publicly traded blockchain-based businesses in their retirement accounts.

Key issues by NYAG to ban crypto investments by pension funds. Source: (compiled by Cointelegraph)

A quick measure in this regard is to add subsections to existing laws – 26 US Code § 408: Individual retirement accounts and 29 US Code § 1104: Fiduciary duties – to prohibit investments in digital assets.

Related: The US Senate Committee on FTX hearing is scheduled for December 1, CFTC head to testify

US Senators Elizabeth Warren, Tina Smith and Richard Durbin have called on Fidelity Investments to reconsider its Bitcoin (BTC) offering to pensioners.

“The recent implosion of FTX, a cryptocurrency exchange, has made it clear that the digital asset industry has serious problems.”

A Fidelity spokesperson told Cointelegraph that the company “always prioritizes operational excellence and customer protection.”