Authored by Naveen Athrappully via The Epoch Times (emphasis ours),
The U.S. Securities and Exchange Commission (SEC) has warned Americans over the risk of including assets like cryptocurrencies in their self-directed individual retirement accounts (IRAs) as well as unregulated trading platforms posing as exchanges.
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| Representations of virtual cryptocurrencies are placed on U.S. Dollar banknotes in this illustration taken on Nov. 28, 2021. (Dado Ruvic/Reuters) |
Some self-directed IRAs offer investment in crypto assets like tokens, coins, and virtual currencies. Such assets “may be securities that are offered without SEC registration or a valid exemption from registration, and may not be accompanied by complete or accurate information to aid investors in making informed decisions,” the SEC said in a Feb. 7 alert.
“In addition, many of the trading platforms for these crypto assets refer to themselves as ‘exchanges’, which may give investors the misimpression that they have registered with the SEC.”
A self-directed IRA is held by a custodian and allows for investments in a wider range of assets than other types of IRA, including cryptocurrencies, promissory notes and precious metals. Investments in such assets come with a risk of fraud as well as a potential lack of information and liquidity.
In addition, self-directed IRAs may also come with the risk of a lack of regulatory and legal protection, the SEC warned. Fraudsters are more likely to exploit self-directed IRAs as custodians of such accounts offer limited protections, the agency added.
‘Informed Decisions’
Federal authorities have raised concerns about crypto assets being included in retirement plans. In March last year, the Department of Labor (DOL) issued guidelines stating that the Employee Benefits Security Administration (EBSA) aimed to investigate 401(k) plans that allow cryptocurrencies and related products.
“Cryptocurrencies are very different from typical retirement plan investments, and it can be extraordinarily difficult, even for expert investors, to evaluate these assets and separate the facts from the hype,” the department said in a March 10 compliance assistance release.
“Participants are less likely to have sufficient knowledge about these investments, as compared to traditional investments, or to have the technical expertise necessary to make informed decisions about investing in them.”
In a Feb. 1 interview with Blockworks, Dan Hoover, director of investment firm Castle Funds, said that DOL guidelines had “chilled interest by plan sponsors and fiduciaries in direct cryptocurrency investments for now.”
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