The controversy surrounding the cryptocurrency exchange FTX and Sam Bankman-Fried (SBF) strengthened the government's belief that stricter regulation is needed for the entire cryptocurrency ecosystem.
The New York AG wants to outlaw cryptocurrency in retirement funds.
Letitia James, the New York Attorney General (NYAG), suggested banning investments in cryptocurrencies like bitcoin and Ethereum in IRAs and defined contribution plans to prevent investors from suffering a similar loss.
James wrote a letter to the US Congress asking for a law to be passed preventing Americans from using their IRAs or defined contribution plans (like 401(k) and 457 plans) to purchase cryptocurrencies or other digital assets.
But according to a study published in October 2022, almost half of the American investors want cryptocurrency to be available in their 401(k) retirement plans.
James also argued that bills like the Retirement Savings Modernization Act and the Financial Freedom Act of 2022, which both make it legal to conduct financial transactions involving digital assets, should be vetoed.
Recent legislation known as the Retirement Savings Modernization Act and the Financial Freedom Act of 2022 is scheduled to take effect in 2022.
Ban putting the security of retirement savings first.
James jotted down four points supporting her demand to exclude digital assets from IRAs and defined contribution plans as she described SBF's Ponzi scheme and misappropriation of members' funds.
More information on these causes will be provided below. The New York Attorney General emphasized the significance of safeguarding retirement savings over a person's lifetime above all else.
Second, she drew attention to Congress' long-standing pledge to protect Americans' retirement savings.
James' final justification for banning cryptocurrency investments was the prevalence of scams and the lack of adequate safeguards.
In addition to the volatility, the custodial and value concerns concluded the list of anxiety causes. On the other hand, the New York Attorney General's office clarified that blockchain technology is different from digital assets.
She thinks Americans should be able to use their retirement savings to buy stock in publicly traded blockchain-based companies.