Labor Department Criticized Fidelity Incorporating Bitcoin for 401(K)
Fidelity’s bold move of offering investors the opportunity to add Bitcoin to their retirement 401(k) accounts has caused concern from the US Labor Department. Though seeing that the speculative nature of Bitcoin is a worrisome issue as it gets incorporated into the retirement plan open to average Americans, the authority said it had no intention of banning the asset in 401(k)s.
Concerns Regarding Cryptocurrency
In an interview with the Wall Street Journal, Ali Khawar, acting assistant secretary of the Employee Benefits Security Administration, revealed that he received a notification from Fidelity the day before it announced to allow 401(k) clients to invest as much as 20% of their account balances in Bitcoin. It was the figure of 20% that put us at unease, he said.
The assistant secretary considered the cryptocurrency a speculative asset, “with a lot of hype there.” He added, “you have to get in now because you will be left behind otherwise.” 401(k) as a pension fund for retirement savings, in his view, should be tilted towards safe assets with much lesser volatility.
Another risk outlined by the Labor Department is the regulatory uncertainty regarding digital assets. Khawar weighted in the lack of consumer protections in such a field, saying the new asset class needs “maturing” before people can put their savings into it.
However, the official clarified that the department had no intention of stopping Fidelity from offering such an asset to its 401(k) clients, and it was up to the employers to decide if they should put money into Bitcoin. He noted that the agency, which isn’t a responsible regulatory authority, could only provide guidance to investors.
In such guidance published before Fidelity’s announcement, the department wrote that employers offering cryptocurrencies should be ready to answer questions from regulators – in terms of “how they can square their actions with their duties of prudence and loyalty” under US pension law.
Responding to the concern derived from the Labor Department, Fidelity said that digital assets offerings will account for a big portion of the financial industry’s future. Dave Gray, head of workplace retirement offerings and platforms at Fidelity, revealed that other cryptocurrencies could be made available in the future.
Fidelity’s plan will be open to more than 20 million participants, and its first client came from MicroStrategy, the software giant which holds almost 130,000 BTC on its corporate balance sheet.
Featured Image Courtesy of CNBC
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