Letitia James, the New York Attorney General, has urged members of Congress to prohibit the purchase of cryptocurrencies using retirement account funds.
The announcement was made on Tuesday by the Attorney General of New York, Letitia James, who stated that she had "urged congressional leaders to adopt legislation that would prohibit investing retirement funds in digital assets, such as cryptocurrencies, digital coins, and digital tokens."

James wrote the following in the letter that she sent on Tuesday to Senator Ron Wyden (Democrat of Oregon), Senator Mike Crapo (Republican of Idaho), Representative Richard Neal (Democrat of Massachusetts), and Representative Kevin Brady (Republican of Texas):

Individual Retirement Accounts (IRAs) and defined contribution plans, such as 401(k) and 457 plans, should not be used to purchase digital assets, such as cryptocurrencies, digital coins, and digital tokens. I am writing this letter on behalf of the people of the state of New York to urge Congress to pass legislation to designate digital assets as assets that cannot be purchased using funds from IRAs or defined contribution plans.

James outlined a number of the reasons why cryptocurrencies do not belong in retirement plans due to the high level of risk they provide. She stated that not only do they have no value in and of themselves, but that they are also extremely volatile and "often an instrument for fraud and crime."

Additionally, the attorney general brought up the terra crash as well as the meltdown of FTX, both of which were followed by sell-offs in the cryptocurrency market. In the midst of suspicions that it mismanaged client cash, cryptocurrency exchange FTX submitted a bankruptcy petition on November 11.

Attorney General James made the following statement while referring to "recent crypto market collapses and other market turbulence":

When people in the United States invest their hard-earned money in volatile assets like cryptocurrencies, they risk losing all they've worked for over the course of their whole lives.

"Over and over again, we have witnessed the risks and flaws that are associated with cryptocurrencies, in addition to the wild swings in the prices of these funds. The United States Attorney General emphasized that hardworking Americans should not be required to worry about the possibility of their retirement savings being wiped out due to risky bets on unstable assets such as cryptocurrencies.

James is also advocating for the rejection of two pieces of legislation that, if passed, would make it possible to invest in cryptocurrencies using retirement accounts. This is what she wrote:

I strongly urge Congress to vote against the Retirement Savings Modernization Act that was recently proposed... as well as the Financial Freedom Act of 2022.

According to James, "the Retirement Savings Modernization Act would expressly allow 401(k) plan fiduciaries to make digital assets an investment option."

The New York attorney general emphasized that the Financial Freedom Act of 2022 would "prohibit the Secretary of Labor from constraining or prohibiting the range of investments offered through a self-directed brokerage window." This would mean that the Secretary of Labor would not be able to prohibit investments in digital assets.

This fall, Fidelity Investments, the company that administers the most 401(k) plans and is the largest in terms of assets, began offering bitcoin investments in retirement accounts. This has caused the Department of Labor in the United States some concern. Treasury Secretary Janet Yellen has also issued a warning about cryptocurrency, stating that it is "very risky," and that most people should not put their savings into it. This week, three senators from the United States wrote to the CEO of Fidelity, Abigail Johnson, requesting that the company discontinue including bitcoin as an investment option for retirement accounts.

What are your thoughts on New York Attorney General Letitia James's recent request to Congress that cryptocurrency investments be banned in 401(k) and other types of retirement accounts? Share your thoughts with us in the section below titled "Comments."