A duo has now become a trio of Democratic Senators who want answers from Fidelity Investments as to why they want to give 401k plan sponsors the ability to expose participants to bitcoin—which they call a “highly volatile and unregulated digital asset.”
In response, Fidelity told 401(k) Specialist Friday it is working directly with policymakers and regulators in an ongoing dialogue, but plans to launch its new Digital Assets Account this fall remain on track.
U.S. Senate Majority Whip Dick Durbin (D-IL) joined Sens. Elizabeth Warren (D-MA) and Tina Smith (D-MN) in sending an open letter to Fidelity CEO Abigail Johnson on July 26 asking “why Fidelity, a trusted name in the retirement industry, would allow plan sponsors the ability to offer plan participants exposure to Bitcoin.”
In joining fellow Senators Warren and Smith in questioning Fidelity about the plan, Sen. Durbin tweeted:
“We should all agree that workplace retirement accounts are no place to gamble. Yet @Fidelity, one of the largest 401k providers, wants to give plan sponsors the ability to expose plan participants to Bitcoin, a highly volatile and unregulated digital asset.”
“I’m joining my colleagues @SenWarren and @SenTinaSmith in sounding the alarm on this risky pursuit.”
“We are proud of the Digital Assets Account as a responsible solution to meet the demands of mainstream interest. In fact, client interest has not only been strong, but also spans across a wide range of industries and company sizes. We are on track to launch our first plan sponsor clients this fall.”
Fidelity statement, July 29
Fidelity of course sent shockwaves rippling through the retirement industry in April when the investing giant announced plans to launch Fidelity’s workplace Digital Assets Account (DAA), which it calls the industry’s first offering that will enable individuals to have a portion of their retirement savings allocated to bitcoin through the core 401k plan investment lineup.
Sens. Warren and Smith had previously sent a letter to Fidelity back on May 4 questioning the company about its plan to allow bitcoin investments for 401k plans—and specifically why Fidelity failed to heed the Department of Labor’s recent warning about crypto investments.
Senators Warren and Smith asked Johnson to also raised concerns about potential conflicts of interest presented by Fidelity being both a bitcoin miner and a purveyor of bitcoin, and included five specific questions it wanted answered by Johnson by May 18.
Fidelity’s specific responses to those questions have not been publicly released, but the company said at the time it looked forward to having a respectful dialogue with policymakers and that it would respond directly to the senators.
The new letter does not include a specific list of questions, but notes that bitcoin (trading at $23,958 as of Friday afternoon) now trades at more than two-thirds less than its November peak of $68,000 and asks for a response to why Fidelity is moving forward with the plan.
“When saving for retirement is already a challenge for so many Americans,” the July 26 letter states, “why would Fidelity allow those who can save to be exposed to an untested, highly volatile asset like Bitcoin?
More from the letter:
“While we appreciate Fidelity’s efforts to help working Americans realize a more secure retirement, this decision is immensely troubling. Perhaps most troubling is that in pointing to the risks of investing in Bitcoin on its website and planning to cap plan participants’ Bitcoin exposure to 20%, Fidelity is acknowledging it is well aware of the dangers associated with investing in Bitcoin and digital assets, yet is deciding to move ahead anyway.
“There are many ways that Americans can invest in Bitcoin and the cryptocurrency casino, but it seems as though this latest effort, through what is supposed to be a retirement nest egg, is a bridge too far. Retirement accounts must be held to a higher standard, one that Bitcoin and other unregulated digital assets fail to meet. This asset class is unwieldy, immensely complex, unregulated, and highly volatile. Working families’ retirement accounts are no place to experiment with unregulated asset classes that have yet to demonstrate their value over time.”
Reached on Friday, Fidelity said things remain on track with the plan, according to a company spokesperson.
“Fidelity continues to have strong interest for digital assets and the blockchain. We are proud of the Digital Assets Account as a responsible solution to meet the demands of mainstream interest,” said a statement. “In fact, client interest has not only been strong, but also spans across a wide range of industries and company sizes. We are on track to launch our first plan sponsor clients this fall.”
As far as responding to the July 26 letter, Fidelity said, “We are continuing our respectful dialogue with policymakers to responsibly provide access with all appropriate consumer protections and educational guidance for plan sponsors as they consider offering this innovative service. Consistent with our ongoing dialogue with regulators and policymakers, we are working with them directly.”
As it announced back in April, software company MicroStrategy was the first company to sign up under Fidelity’s new initiative, and plans to add it to its 401k plan later this year when available.
SEE ALSO:
• Fidelity to Offer Bitcoin in 401ks
• DOL Cautions 401k Fiduciaries on Cryptocurrencies in Wake of Executive Order
• DOL Sued for Attempting to Ban Crypto in 401ks
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
