US banking agencies advise against exposing retirement assets to cryptocurrency.
In a warning to investors, the financial watchdogs targeted self-directed individual retirement accounts with potential exposure to cryptocurrency.
Three US financial watchdogs have issued a warning to investors considering certain individual retirement accounts with cryptocurrency exposure.
The US Securities and Exchange Commission’s Office of Investor Education and Advocacy, the North American Securities Administrators Association, and the Financial Industry Regulatory Authority stated in a Feb. 7 notice that self-directed individual retirement accounts, or IRAs, may include assets with potential risks, such as cryptocurrencies. Some of the aforementioned IRAs, according to the agencies, may provide exposure to crypto assets that qualify as securities “without SEC registration or a valid exemption from registration” and without providing the information required to make informed investment decisions.
“Some self-directed IRAs may provide investments in ‘crypto assets,’ such as ‘virtual currencies,’ ‘coins,’ and ‘tokens,'” according to the notice. “Many of the trading platforms for these crypto assets refer to themselves as ‘exchanges,’ which may mislead investors into thinking they have registered with the SEC.”
Following a tumultuous year of crypto firms filing for bankruptcy and prominent fraud cases such as that of former FTX CEO Sam Bankman-Fried, many lawmakers and regulators have targeted crypto investments, both in and out of retirement accounts. In November, New York Attorney General Letitia James proposed a ban on crypto investments in 401(k)s and IRAs. However, pro-crypto Senator Cynthia Lummis stated in a December interview that she still wants Bitcoin to be included in 401(k) retirement plans.
The uncertainty surrounding which crypto projects are considered securities or where they fall under regulatory guidelines in the United States has prompted criticism from many market participants. Following 18 months of discussions with regulators, crypto lending firm Nexo announced plans to gradually cease operations in the United States in December.