Fidelity Crypto 401k Attracts the Ire of the Labor Department

It’s not surprising when a given day sees crypto bulls at odds with the U.S. government. So, today’s news about Fidelity’s new crypto retirement plan does not have anybody batting an eye. Fidelity crypto 401k plans are becoming a thing, and while some are embracing the pension accounts with open arms, others — like the U.S. Labor Department — are showing a fair bit of skepticism.

A Bitcoin (BTC) coin frozen in ice.
Source: Shutterstock

For a long while now, crypto fanatics have been pushing for the ubiquity of digital currency as a viable financial tool. Those envisioning a future where crypto is fully embraced like fiat currency are pushing for things like crypto exchange-traded funds (ETFs) and retirement funds. However, this future still seems like only a pipe dream, with the U.S. Securities and Exchange Commission (SEC) shooting down every crypto spot ETF that crosses its path.

Fidelity Investments is proving to be a bright spot in the midst of this struggle between crypto faithful and regulators. Earlier this week, it made the bombshell announcement that it will offer Bitcoin (BTC-USD) 401k contributions for eligible investors. Through this new service, employees can load up 20% of their retirement plans with cryptocurrency.

This is a first-of-its-kind offering, and the news has stirred up quite a bit of chatter. Adding to the excitement is news that data analytics company MicroStrategy (NASDAQ:MSTR) will be the first company to offer the service to its employees. Of course, this comes as little surprise. MicroStrategy CEO Michael Saylor is one of the most outspoken Bitcoin fanatics in the world. His company currently holds over $6 billion in Bitcoin on its balance sheet.

Fidelity Crypto 401k Sparks Bearish Comments From the U.S. Labor Department

This Fidelity crypto 401k is a massive moment. It marks the first time ever that one can add crypto to a pension fund. It’s certainly a step forward in making cryptocurrency a ubiquitous asset. And, there’s reason to believe other financial services companies will be carefully watching how Fidelity’s offering unfolds and preparing their own responses to it. However, the announcement is far from universally celebrated.

More than a few financial advisors and experts have voiced their concerns with Fidelity’s new offering. Some say that the volatility of the asset class makes a crypto 401k too dangerous, while others argue that only offering Bitcoin is severely limiting in an asset class of thousands of coins and tokens. But perhaps no entity has been more critical than the Labor Department, who is harshly criticizing the offering today.

Employee Benefits Security Administration Assistant Secretary Ali Khawar delivered a statement on behalf of the department this morning. In it, Khawar says that the entity has “grave concerns with what Fidelity has done.” Khawar goes on to explain that Fidelity gave the department only one day’s notice before publicly announcing the 401k offering.

The concern stems from a desire to protect less wealthy Americans. Many might be lured in by crypto’s reputation for big gains, while overlooking volatility. “We are not talking about millionaires and billionaires that have a ton of other assets to draw down,” Khawar says. Still, it seems the department isn’t going to actively fight against the offerings. Khawar says that it is a company’s prerogative whether they can make a case for crypto assets in retirement funds.

In the past month, Bitcoin has shown exactly the volatility Khawar and the Labor Department warn against. BTC prices have dropped 18%, taking prices from $47,600 to $38,900 in that time.

On the date of publication, Brenden Rearick did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

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