New York Attorney General Letitia James has called on Congress to pass legislation to ban cryptocurrency investments in retirement accounts. “Hard-working Americans need not worry about their retirement savings being wiped out by risky bets on volatile assets like cryptocurrencies,” she stressed.
NYAG Letitia James Urges Congress to Ban Cryptocurrency Investments in Retirement Accounts
New York Attorney General Letitia James announced on Tuesday that she “urged Congressional leaders to pass legislation to ban the investment of retirement funds in digital assets such as cryptocurrencies, digital coins and digital tokens.”
In a letter she sent to Senator Ron Wyden (D-OR), Senator Mike Crapo (R-ID), Rep. Richard Neal (D-MA), and Rep. Kevin Brady (R-TX) on Tuesday, James wrote:
On behalf of the people of the State of New York, I call on Congress to pass legislation that defines digital assets—such as cryptocurrencies, digital coins, and digital tokens—as assets that cannot be purchased with funds in Individual Retirement Accounts (IRAs) and defined contribution plans, such as like plans 401(k) and 457.
James gave several reasons why cryptocurrencies are too risky to be used in retirement plans. In addition to having no intrinsic value, they are extremely unstable and “often a tool for fraud and crime,” she said.
The Attorney General also cited the collapse of Terra and the collapse of FTX, followed by sell-offs in the cryptocurrency market. Cryptocurrency exchange FTX filed for bankruptcy on November 11 amid investigations into the mishandling of customer funds.
Referring to “recent cryptocurrency market crashes and other market turmoil,” Attorney General James said:
Investing Americans’ hard-earned retirement funds in collapsing cryptocurrencies could undo a lifetime’s hard work.
“Time and time again we have seen the dangers and pitfalls of cryptocurrencies and the wild fluctuations of these funds. Hard-working Americans need not worry about their retirement savings being wiped out by risky bets on volatile assets like cryptocurrencies,” the Attorney General said.
James also wants lawmakers to reject two bills that would allow crypto investments in retirement accounts. She wrote:
I call on Congress to reject the recently proposed Retirement Savings Modernization Act…and the Financial Freedom Act of 2022.
James explained that the Retirement Savings Modernization Act would “explicitly allow 401(k) plan fiduciaries to turn digital assets into an investment option.”
The Financial Freedom Act of 2022 “prohibits the Secretary of Labor from restricting or banning certain investments offered through a self-managed brokerage window, i.e. the Secretary of Labor will not be able to ban investments in digital assets.” stressed the Attorney General.
Fidelity Investments, the largest 401(k) administrator by assets, began offering bitcoin investments in retirement accounts this fall. This worried the US Department of Labor. Treasury Secretary Janet Yellen also warned that cryptocurrency is “very risky”, noting that it is not suitable for most retirees. This week, three US senators sent a letter to Fidelity CEO Abigail Johnson urging her firm to stop offering bitcoin as an option for retirement accounts.
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