Authorities were convinced that stronger regulation is needed for the entire cryptocurrency ecosystem after the upheaval surrounding the cryptocurrency exchange FTX by Sam Bankman-Fried.
Letitia Jam, New York Attorney General (NYAG), suggested banning investments in cryptocurrencies Like bitcoin and ethereum in individual retirement accounts and defined contribution plans to protect investors from a similar loss (IRAs).
James wrote a letter to Congress asking for legislation to prohibit citizens of the United States from using funds from their individual retirement account (IRAs) or defined contribution plans (such 401(k), 457 plans) in order to buy cryptocurrencies and other digital assets.
However, a survey done in October 2022 showed that nearly half the investors based in the United States would like crypto to be part of their 401(k), or retirement plans.
James further argued that the Retirement Modernization Act and Financial Freedom Act of 2022 which would legalize financial transactions using digital assets should be repealed. The Retirement Savings Modernization Act, which was proposed recently, is currently in effect. The Financial Freedom Act of 2022 has been set to go into effect in 2022.
James jotted four reasons for her request to have digital assets removed from IRAs or defined contribution plans. This was when she was describing SBF’s role as a Ponzi Scheme operator and misappropriating members’ monies. These reasons will also be explained in detail below.
The New York Attorney general stressed how important it was to protect retirement funds over the course of a lifetime.
Zweiten, she highlighted the historical responsibility of Congress in protecting the retirement savings and pensions of American citizens.
James used stories such as the high number of scams and inadequacy of safeguards to justify banning cryptocurrency investment.
These issues, as well as volatility, were rounded out by the custodial or value problems.
On the other hand, New York’s Attorney General explained that blockchain technology can be separated from digital assets.
She believes that citizens of the United States should be able use retirement funds to acquire equity in publicly-listed blockchain-based companies.