New York AG pushes ban on crypto purchases via pension funds

The NYAG clarified that digital assets differ from blockchain technology, and it has no problem with citizens buying stakes in from publicly traded blockchain-based companies to retired accounts.

The turmoil surrounding crypto exchange FTX and Sam Bankman-Fried (SBF) has reaffirmed regulators' belief in the need for tighter oversight across the crypto ecosystem. Seeking to protect investors from similar fallout, New York Attorney General (NYAG) Letitia James has recommended banning crypto investments in defined contribution plans and Individual Retirement Accounts (IRAs).

In a letter to members of the US Congress, James called for legislation that would prohibit US citizens from purchasing cryptocurrencies and digital assets using their funds in IRAs and defined contribution plans such as 401(k) and 457 plans. However, an October 2022 survey showed that nearly 50% of US-based investors want crypto to be part of their 401(k) retirement plans.

James further launched the rejection of two laws – the recently proposed Retirement Savings Modernization Act and the Financial Freedom Act of 2022 – that seek to allow investments in digital assets. While highlighting SBF's involvement in running a Ponzi scheme and embezzling user funds, James noted four main reasons behind his call to exclude digital assets from IRAs and defined contribution plans, as explained below.

First, the NYAG emphasized the importance of protecting long-term retirement savings. Second, she underscored Congress' historic obligation to protect American citizens' retirement funds. James used narratives including fraud and the lack of sufficient safeguards as a third reason to ban crypto investments. The final concern was volatility and uncertainties related to storage and valuation.

On the other hand, the NYAG clarified that there is a distinction between digital assets and blockchain technology. She believes that U...