New York Attorney General Letitia James is calling for a ban on crypto assets as an investment option for retirement accounts.
In a recent letter penned to members of Congress, James details why the practice of allocating cryptocurrencies to 401(k) retirement funds should be outlawed, adding that she believes the asset class has no intrinsic value.
“On behalf of the People of the State of New York, I urge Congress to pass legislation to designate digital assets – e.g., cryptocurrencies, digital coins, and digital tokens – as assets that cannot be purchased using funds in [retirement accounts]…
Although cryptocurrencies have become popular over the last decade, they have no intrinsic value on which their prices are based.
They generally do not provide investors with an ownership or equity interest in a company like a corporate stock, nor do they represent a creditor’s ownership of a debt obligation like the holder of a corporate bond, although they are often marketed as investments from which investors can expect to make profits from the actions of others.”
James says choosing digital assets as investment options for retirement accounts is too risky, citing price volatility, fraud and lack of regulations.
According to the Attorney General, the biggest risk to putting crypto assets in retirement funds stems from the absence of safeguards that are found in traditional finance.
“Perhaps [the] most important reason that cryptocurrencies are incompatible with IRAs and defined contribution plans is that the issuers often evade safeguards designed to protect the average investor and the integrity of the system…
Unlike registered broker-dealers, crypto trading platforms may lack customer protections and transparency to protect against conflicts of interest that could arise as a result of the platforms’ employees trading for their own personal accounts or the platforms engaging in proprietary trading on their own venue, for example, as a market maker.”
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