The NYAG made it clear that digital assets are distinct from blockchain technology. They had no objections to people using retirement funds to buy stock in publicly traded blockchain-based companies.
Sam Bankman-Fried (SBF) Confirmed The Regulators’ Conviction
The controversy surrounding the cryptocurrency exchange FTX and Sam Bankman-Fried (SBF) confirmed regulators’ conviction that the crypto sector requires more stringent regulation. Letitia James, the NYAG, suggested banning cryptocurrency investments in defined contribution plans and individual retirement accounts to safeguard investors from a similar outcome (IRAs).
James asked for legislation in a letter to members of the U.S. Congress that would prevent Americans from investing in cryptocurrencies and other digital assets using money from IRAs and defined contribution plans like 401(k) and 457 plans. However, a poll from October 2022 revealed that almost 50% of Americans who invest in cryptocurrencies want them to be included in their 401(k) retirement plans.
James also argued against the Financial Freedom Act of 2022 and the recently proposed Retirement Savings Modernization Act, which would have permitted investing in digital assets. James listed four main justifications for her demand to bar digital assets from IRAs and defined contribution plans, as stated below while noting SBF’s role in operating a Ponzi Scheme and stealing consumers’ money.
The NYAG emphasized the significance of long-term retirement savings protection first and foremost. Second, she emphasized Congress’ historical responsibility to safeguard Americans’ retirement savings. James cited fraud and inadequate safeguards as her third justification for banning cryptocurrency investments. The volatility, custodial uncertainty, and value issues were the last areas of worry.
On the other hand, the NYAG made it clear that blockchain technology and digital assets are two different things. She agrees that Americans should be able to use retirement funds to invest in publicly traded blockchain-based companies.
Key factors that NYAG took into account while deciding to forbid crypto investing through retirement accounts. from ag.ny.gov (collated by Cointelegraph)
An early step in this direction would be to ban investments in digital assets by adding subparagraphs to the current laws, 26 U.S. Code 408: Individual Retirement Accounts and 29 U.S. Code 1104: Fiduciary obligations.
Related: US Senate committee to hold FTX hearing in December, with testimony from CFTC chief
United States senators Tina Smith, Elizabeth Warren, and Richard Durbin asked Fidelity Investments to reevaluate its Bitcoin BTC policy.
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Making The Following Offer To Retirees:
The recent collapse of the cryptocurrency exchange FTX has amply demonstrated the significant issues facing the digital asset market.
The corporation “has always prioritized operational excellence and consumer protection,” a Fidelity spokeswoman told Cointelegraph.