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Three financial oversight agencies in the United States issued a warning to investors considering certain individual pension accounts exposed to cryptocurrencies.
In a Feb. 7 notice, the United States Securities and Exchange Commission’s Office of Investor Education and Advocacy, the North American Securities Administrators Association, and Financial Industry Regulatory Authority said self-directed individual retirement accounts, or IRAs, may include assets with potential risks, including cryptocurrencies. Agencies say, Some of the above risks may provide exposure to eligible crypto assets as titles "without dry registration or valid exemption from registration" and without providing the necessary information to make informed investment decisions.
"Some stand-alone Iras can offer investments in "crypto assets" such as "virtual currencies", "coins" and "tokens," the opinion said. "Many of the trading venues for these crypto assets refer to themselves as "swaps", which can give investors the mistaken impression that they have registered with the SEC."
INVESTOR ALERT: Self-Directed IRAs enable investment in a larger and potentially riskier asset portfolio 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
Investments in cryptography have been targeted by numerous legislators and regulatory bodies, Inflows and outflows into and out of pension accounts, after a tumultuous year of failed crypto companies and significant fraud cases such as the one of former FTX CEO Sam Bankman-Fried. In November, New York Attorney General Letitia James recommended prohibiting crypto investments in defined contribution plans and IRAs. However, pro-crypto Senator Cynthia Lummis said in a December interview she would still like to see Bitcoin () included in 401(k) retirement packages.
Related: Roth IRAs: The perfect cryptocurrency placement in the long run?
The uncertainty surrounding crypto projects that are considered securities or that are subject to regulatory guidelines in the United States has given rise to criticism from many companies active in the marketplace. In December, crypto lending firm Nexo announced plans to gradually cease operations in the United States following 18 months of discussions with regulators.
