Retirement Funds Investing In Cryptocurrencies Now Under The Radar of the SEC
Self-directed individual retirement accounts have been recently under the radar of the U.S. Securities and Exchange Commission (SEC), the country’s top-moth securities watchdog. One of the branches of the SEC - The Office of Investor Education and Advocacy has recently issued an investor alert while warning retirement funds investing in digital currencies.
IRAs are basically savings accounts with certain tax benefits which can be accessed during any given time of the saver’s retirement. On the other hand, a self-directed IRA allows for alternative investments in areas like company stocks, real estate, intellectual properties, precious metals and much recently digital currencies.
The warning notes that the main difference between a regular IRA and a self-directed one is that the first one is taken care off by Internal Revenue Service-approved custodians while the latter i.e. self-directed IRA is held by custodians that “disclaim most duties to investors”.
The warning also notes that there has been a growing concern about the Initial Coin Offerings and ICOs being used by fraudsters. It also acknowledges that cryptocurrency investments can be “fair and lawful” but also mentions that they “may not provide complete or accurate information to aid investors in making informed decisions.”
The warning also notes that the holders of the self-directed IRAs are more at risk against regular IRAs because the custodians of these funds “typically have only limited duties to investigate the assets or the background of the promoter.” Fraudsters and seamsters can take advantage of this fact by telling investors that they can be trusted due to receiving the custodian approval. However, this is not the case.
It has to be noted that the investors are subjected to higher risks being complacent in their examination of investments as they aren’t allowed to access the money before a certain age.
Cryptocurrency market has remained a lot volatile and the recent meltdown in the cryptocurrency market has created a lot of Fear, Unrest and Doubt especially among retail investors. Since the beginning of the year, almost all of the top-twenty cryptocurrencies have lost nearly 80% valuations. The overall cryptocurrency market valuations have also plunged by nearly 75%, coming below to $200 billion for the first time in 2018.
Moreover, with multiple hacks of the cryptocurrency exchanges reported this year, there is a huge risk of funds being stolen by the hackers.