New York Attorney General Letitia James has sent a letter to US congressional leaders urging “common sense” federal crypto regulations and to keep digital assets out of US pensions.

“I am urging Congress to pass legislation that would strengthen federal regulations on the cryptocurrency industry to protect investors, strengthen financial markets, and stop fraud,” James said in a 14-page letter shared on April 10, outlining six major risks if the sector remains unregulated.

She said that without appropriate safeguards, the “unchecked proliferation of digital assets” undermines US dollar dominance, weakens national security due to criminal activity, and “undermines the stability of financial markets.” 

Unregulated crypto also subjects investors to “price manipulation and rigged markets,” facilitates fraud that “drains billions of dollars from hardworking Americans, and extracts assets and investments from the American economy,” she said. 

An excerpt of James’ letter to Congress. Source: Office of the New York State Attorney General

James made a number of recommendations and pushed Congress for legislation that would require stablecoin issuers to have a US presence and regulatory oversight and mandate backing stablecoins with US dollars or treasuries. 

She also wants regulations that require platforms to work only with anti-money laundering-compliant entities, establish registration requirements for issuers and intermediaries, protect against conflicts of interest and promote price transparency and require fraud prevention measures.

No crypto assets in pension funds 

The New York’s top lawyer also aired her concerns about including crypto in pension funds. 

“Digital assets are uniquely unsuitable for retirement savings due to their high volatility,” she said, claiming that they have no value.

“The underlying value of cryptocurrency is unpredictable and not determined by true price discovery because they have no intrinsic value on which their prices are based.”

James also urged against retirement funds investing in crypto-tracking exchange-traded funds, stating that “unlike traditional exchange-traded funds backed by stocks and bonds, cryptocurrency held to back cryptocurrency ETFs are at risk of permanent theft.” 

Related: US lawmaker will reintroduce crypto retirement bill to help Trump agenda

“As Congress takes the mantle to propose legislation governing the cryptocurrency industry, we hope it also takes action to mitigate the risks posed by the industry to America’s national security, financial stability, and citizens,” James said. 

The call for regulation follows the US Department of Justice’s reported dismantling of its federal criminal cryptocurrency fraud enforcement division.

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