NY Attorney General Urges Congress to Ban Pension Investments in Crypto Assets

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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 Nov. 22 letter to members of Congress, James argued that U.S. lawmakers need to protect workers’ retirement funds from high-risk crypto assets, especially after the recent FTX crash that caused billions in losses. retail users. James said,

“On behalf of the people of New York State, I urge Congress to pass legislation to designate digital assets – for example, cryptocurrencies, digital coins, and digital tokens – as assets that cannot not be purchased with funds in [retirement accounts]”,

James added that while investing in crypto assets has grown in the past two years, these assets “have no intrinsic value on which their prices are based.”

“They generally do not provide investors with ownership or an interest in a company like a corporate stock, nor do they represent the ownership of a creditor of a debt security like the holder of a corporate bond, although they are often marketed as investments from which investors can expect to profit from the actions of others,” she added.

The New York Attorney General has also asked Congress to reject the recently proposed Retirement Savings Modernization Act, which gives 401(k) savers the same access as retirement plan savers to plan options. diversified and alternative pensions.

James also urged Congress to reject the Financial Freedom Act of 2022, which would prevent the Secretary of Labor from banning investments in digital assets.

Overall, James’ argument cited four reasons why US lawmakers should ban crypto purchases. First, she said it would help protect retirement savings. Second, she said Congress was obligated to “protect American workers’ retirement savings from digital assets.”

Third, James noted the materialization of risks posed by digital assets and ultimately stated that these assets have no intrinsic value and there is a risk of fraud.

The letter comes amid recent fallout from cryptocurrency exchange FTX, which announced it had filed for Chapter 11 bankruptcy in Delaware a few weeks earlier.

As reported, FTX has lent up to $10 billion in client assets to fund risky bets by its affiliate trading firm, Alameda Research. Since FTX had $16 billion in client assets, the exchange had loaned out more than half of its clients’ funds.

The recent drama around FTX has set the stage for one of the worst crypto price crashes in the past year. 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 at least 20% in the past 10 days.

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