Skip to content Skip to sidebar Skip to footer


The turmoil surrounding the FTX crypto exchange and Sam Bankman Fried (SBF) 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 address to members of the US Congress, James called for legislation that would prohibit US citizens from buying 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 to see crypto becomes 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 – which 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 custody and valuation.

On the other hand, the NYAG clarified that there is a distinction between digital assets and blockchain technology. She thinks US citizens should be allowed to buy stakes in publicly traded blockchain-based companies in retirement accounts.

Key NYAG Considerations for Banning Crypto Investments Through Pension Funds. Source: ag.ny.gov (collected by Cointelegraph)

An immediate step in this regard would be to add sub-paragraphs to existing laws – 26 US Code § 408: Individual Retirement Accounts and 29 US Code § 1104: Fiduciary Duties – to prohibit investments in digital assets.

Related: US Senate committee plans FTX hearing for Dec. 1, CFTC chief to testify

US Senators Elizabeth Warren, Tina Smith and Richard Durbin have asked Fidelity Investments to reconsider its Bitcoin (BTC) offers to retirement savers, mentioning:

“The recent implosion of FTX, a cryptocurrency exchange, has made it clear that the digital asset industry is in serious trouble.”

A Fidelity spokesperson told Cointelegraph that the company “has always prioritized operational excellence and customer protection.”