The New York Attorney General is seeking to confiscate funds from investors in digital assets ( News New York )

The aftershocks of the FTX disaster continue to roll. The latest industry shake-up came on November 22, as New York Attorney General (NYAG) Letitia James urged lawmakers to freeze retirement plans and invest in digital assets in IRAs.

In a letter to Congress, James proposes a law that would block digital investment retirement plans and, adding the cherry on top, also calls for the scrapping of two acts on the table, namely the Unemployment Savings Modernization Act and the Financial Freedom Act of 2022. He would allow 401(k) plan fiduciaries to gain digital investment options, while the Secretary of Labor would forcefully stop digital investment in assets.

This is not the first time James has tried to undermine the “crypto Wild West”, the same NYAG that, in 2019, went after Bitfinex and Tether, convening a team of ‘perverts’ in an attempt to avoid the investigation of the reported $850 million losses suffered by Bitfinex, which Tether said it helped cover up. The case was finally settled in February of last year in a plea deal that involved the payment of an $18.5 million fine and no admission of wrongdoing.

This is the latest move by the NYAG against an asset class it describes as having “no intrinsic value on which their prices are based”, in the wake of the FTX collapse.

In the letter, James states that the recent bankruptcy of FTX “has brought the value of many cryptocurrencies to new all-time highs” – in his opinion, this too frequent event demonstrates “the extreme volatility and risk many of these assets present.” As further evidence, the TerraUSD crash in May showed that many digital assets also dropped to “record lows and investors lost hundreds of billions of dollars.”

When discussing the collapse of FTX, James suggests how CEO Sam Bankman-Fried described the former digital industry’s role “in almost the same way you would describe a typical Ponzi scheme.” Specifically, Bankman-Fried’s own description of it as a box that “does virtually nothing… This box is clearly worthless.”

According to the practice of his project, James preceded in various laws passed to help workers save for retirement (eg, the introduction of 401ks in 1978), as well as legislation to “security accounts from the huge loss that are now synonymous with digital assets” – a key example of 403(b) strategies that are now limited to investing in annuities and mutual funds.

The letter to Congress expands on the dangers of digital assets and the reasons why retirement plans should be protected, but James’ main reasons are:

  1. Most digital assets have no intrinsic value and are therefore too unstable to be suitable for receiving savings.
  2. Digital generation companies will also be vulnerable to fraud, crime, theft, and privacy issues.
  3. Digital asset companies are not doing enough safeguards to protect their privacy.

The NYAG reversed its case, suggesting that the easiest way to put the defenses into law would be to add subsections to existing legislation — 26 US Code § 408 (individual retirement accounts) and 29 US Code § 1104 (fiduciary duties) prohibiting investment. in digital goods.

James suggests that exchanges should not stop individual investors or companies from buying into digital assets. However, barring the multi-billion dollar retirement and pension fund market from interacting with the digital asset space would be a huge loss of potential investors at a time when the industry is still licking its wounds.

See: United Head, Digital Innovation and Blockchain at DG Connect, European Commission Pēteris Zilgalvis on Bitcoin Association Blockchain Policy Matters

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