New York Attorney General Letitia James has urged lawmakers to ban the use of crypto assets as an investment option for retirement accounts.
In a November 22 letter penned to members of Congress, James claimed that US lawmakers need to protect workers’ retirement funds from high-risk crypto assets, especially after the recent collapse of FTX that delivered billions in losses to retail users. James said,
“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],”
James added that while investment in crypto assets has found momentum over the past couple of years, these assets “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,” she added.
The NY Attorney General also asked Congress to dismiss the recently proposed Retirement Savings Modernization Act, which gives 401(k) savers the same access as pension plan savers to diversified and alternative retirement plan options.
James also urged Congress to reject the Financial Freedom Act of 2022, which would prevent the Secretary of Labor from banning digital asset investments.
Overall, James’ argument cited four reasons why US lawmakers should ban crypto purchases. In the first place, she claimed this would help protect retirement savings. Secondly, she said Congress is obligated to “protect the retirement savings of America’s workers from digital assets.”
Thirdly, James noted the materialization of the risks posed by digital assets and finally said these assets have no intrinsic value and there is a risk of fraud.
The letter comes amid the recent fallout of cryptocurrency exchange FTX, which announced that it had filed for Chapter 11 bankruptcy in Delaware a couple of weeks earlier.
As reported, FTX lent as much as $10 billion worth of customer assets to fund risky bets by its affiliated trading firm, Alameda Research. Since FTX had $16 billion in customer assets, the exchange had lent more than half of its customer funds.
The recent drama around FTX has set the stage for one of the worst crypto price crashes over the past year. The flagship cryptocurrency, Bitcoin, has been trading around the $16,000 mark for the past week, a level not seen in two years. The broader crypto market is also down by at least 20% over the past 10 days.