New York AG wants crypto ban for pension funds

The upheaval surrounding cryptocurrency exchange FTX and Sam Bankman-Fried (SBF) confirmed the authorities’ conviction that there is a need for stronger regulation throughout the cryptocurrency ecosystem.

Letitia James, New York Attorney General (NYAG), proposed to ban investments in cryptocurrencies such as bitcoin and ethereum in savings plans and individual retirement accounts to protect investors from experiencing similar losses (IRA).

James wrote a letter to members of the United States Congress asking for legislation to be passed that would prohibit American citizens from using funds from their Individual Retirement Accounts (IRAs) and savings plans (such as 401(k) and 457 plans. ) to purchase cryptocurrencies and other digital assets.

On the other hand, the results of a study conducted in October 2022 indicated that nearly half of US-headquartered investors want crypto to be included in their 401(k) retirement plans.

Furthermore, James argued that the Retirement Savings Modernization Act and the Financial Freedom Act of 2022, both of which would legalize financial transactions involving digital assets, should be shot down. The Pension Savings Modernization Act is a recent proposal, and the Financial Freedom Act from 2022 is due to come into force in 2022.

James wrote down four main reasons to support her request to remove digital assets from IRAs and defined benefit plans as she outlined SBF’s role in running a Ponzi scheme and misappropriating members’ money. These reasons will be described in more detail below.

The New York Attorney General emphasized, above all else, the importance of protecting retirement funds throughout life.

Second, she called attention to the historic responsibility that Congress has to secure the retirement savings of the American people.

As her latest justification for banning cryptocurrency investments, James cited stories such as the prevalence of fraud and the absence of adequate safeguards.

Custody and value issues rounded out the list of things that caused anxiety, along with volatility.

The New York Attorney General’s office, however, explained that there is a distinction between blockchain technology and digital assets.

She is of the opinion that pension funds should be able to be used to purchase shares in listed blockchain-based companies by US citizens.