The Department of Labor responded quickly to Fidelity Investments’ announcement on April 26 that it would offer participants the ability to allocate a portion of their retirement investment to bitcoin.
“We are not talking about millionaires and billionaires that have a ton of other assets to draw down.”
Acting EBS Assistant Secretary Ali Khawar
“We have grave concerns with what Fidelity has done,” Ali Khawar, acting assistant secretary of the Employee Benefits Security Administration (EBSA), told The Wall Street Journal soon after the news broke.
He added there is “a lot of hype around ‘You have to get in now because you will be left behind otherwise’…For the average American, the need for retirement savings in their old age is significant. We are not talking about millionaires and billionaires that have a ton of other assets to draw down.”
Khawar indicated he and the EBSA staff would speak with Fidelity about the department’s concerns, many of which were highlighted in the DOL’s compliance assistance guidance published on March 10 for 401k plan fiduciaries considering plan investments in cryptocurrencies.
The Labor Department said it was worried about “the prudence of a fiduciary’s decision to expose a 401k plan’s participants to direct investments in cryptocurrencies, or other products whose value is tied to cryptocurrencies.”
Fidelity began its exploration of blockchain technology in 2014 with bitcoin mining and in 2018 launched its first commercial offering: Fidelity Digital Assets, a platform that offers custody and trade execution for digital assets to institutional investors. In 2020, Fidelity’s digital asset management business launched a private bitcoin fund currently available to accredited investors.
The announcement of Fidelity’s workplace digital assets account represents what the firm calls its continued commitment to evolve and broaden its digital assets offerings amidst a steadily growing demand for digital assets across investor segments.
According to a recent Fidelity digital assets study, 30% of U.S. institutional investors surveyed would prefer to buy an investment product containing digital assets.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
For someone at sometime this new widget may be beneficial; we don’t know. The gist of DOL concern is appropriate but it should limit its interference to facilitating adequate disclosure, communication and educational guidance to plan fiduciaries and participants.