Responding to growing investor interest in cryptocurrency, Fidelity Investments announced this week that it would soon add Bitcoin as an option in company-sponsored 401(k) plans.
- Fidelity announced that it would offer Bitcoin in company-sponsored 401(k) plans, becoming the largest retirement plan provider to offer the option.
- The investment firm said it would allow investors to put as much as 20% of their contributions in Bitcoin, but individual employers could set their own limits.
- Government regulators warned in March that Bitcoin and other cryptocurrencies are risky and said that “fiduciaries” should “exercise extreme care” when deciding whether to offer them in retirement plans.
Right now, only one company is signed up with Fidelity on the plan. MicroStrategy, a business intelligence and cloud-services provider, will add the Bitcoin offering to its 401(k) later this year. Fidelity plans to make the new Bitcoin account available to more employers, who would have the option of offering it to their employees or not, by mid-2022.
Fidelity said it would let investors put up to 20% of their account balance and contributions into the new Bitcoin account, although employers would be able to set their own limits.
Fidelity is not the first investment firm to offer Bitcoin as a 401(k) option, but it is the largest, and the company said in a statement that it’s the first to offer Bitcoin as a “core” option for 401(k) accounts. Retirement plan manager ForUsAll already has a 401(k) option that allows participants to invest in cryptocurrency, including Bitcoin, but it caps the investment at 5% of contributions.
The move by Fidelity was expected to boost investor access to Bitcoin, the best-known of thousands of cryptocurrencies. But government regulators have expressed concern about the risks of letting workers use retirement savings to invest in crypto, which is known for volatile price swings. Bitcoin traded at around $38,900 Wednesday, down about 43% from its all-time high of over $68,000 in November 2021.
Calling crypto investing “speculative,” the Labor Department in March issued guidelines for investment firms–like Fidelity–to “exercise extreme care” before including cryptocurrencies in a 401(k) retirement plan.
“At this early stage in the history of cryptocurrencies, the Department has serious concerns about the prudence of a fiduciary's decision to expose a 401(k) plan's participants to direct investments in cryptocurrencies, or other products whose value is tied to cryptocurrencies,” the Department wrote in a statement.
Fidelity called its decision “innovative,” however, and said there was a steadily growing demand for digital assets like Bitcoin. The firm said some 80 million U.S. individual investors already own, or have invested in, digital currencies.
Some observers think Fidelity’s decision to add Bitcoin to mainstream retirement plans will have a big impact on the crypto market.
“Fidelity is about to do for Bitcoin what it did for stocks starting in the 1980s. Bitcoin is a fixed supply and Fidelity‘s engine of distribution will swell demand,” Anthony Scaramucci, founder of investment firm SkyBridge, wrote on Twitter Tuesday.
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