Three US financial watchdogs have issued a warning to investors considering certain individual retirement accounts with cryptocurrency exposure.
In a notice published Feb. 7, the U.S. Securities and Exchange Commission’s Office of Investor Education and Advocacy, the American Securities Managers Association, and the Financial Industry Regulatory Authority said individual retirement accounts Self-managed IRAs, or IRAs, can include assets with potential risks, including cryptocurrencies. According to the agencies, some of the IRAs mentioned could offer exposure to crypto assets that qualify as securities “without SEC registration or a valid exemption from registration” and without providing the information necessary to make informed investment decisions.
“Some self-directed IRAs may offer investments in ‘crypto-assets’ such as ‘virtual currencies,’ ‘coins,’ and ‘tokens,'” the notice says. “Many of the trading platforms for these crypto assets refer to themselves as ‘exchanges,’ which can give investors the mistaken impression that they have registered with the SEC.”
INVESTOR ALERT: Self-directed IRAs allow investment in a broader and potentially riskier portfolio of assets than other types of IRAs. Make sure you know the risks and what to look out for before you invest in a #SelfDirectedIRA. https://t.co/wRibNOlHAu pic.twitter.com/bxKadYNDrO
— SEC Investor Ed (@SEC_Investor_Ed) February 7, 2023
Cryptocurrency investments, both in and out of retirement accounts, have been targeted by many lawmakers and regulators following a tumultuous year of cryptocurrency companies going bankrupt and scandalous cases of fraud, such as that of former FTX CEO Sam Bankman-Fried. In November, New York Attorney General Letitia James recommended banning cryptocurrency investments in defined contribution plans and IRAs. However, pro-crypto Senator Cynthia Lummis said in an interview in December that she would still like to see Bitcoin (BTC) included in 401(k) retirement plans.
Uncertainty around which crypto projects are considered securities or where they fall within regulatory guidelines in the United States has sparked criticism from many companies operating in the market. In December, cryptocurrency lending firm Nexo announced plans to phase out operations in the United States after 18 months of talks with regulators.
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