Fidelity’s bitcoin 401(k) plan tests regulators’ crypto knowledge


The Department of Labor released earlier this year orientation about employee retirement programs that offer cryptocurrency investments. Taken from Fidelity Investments: Useless.

Why is this important: Fidelity’s intention to offer a retirement plan with bitcoin later this year tests the government’s understanding of the crypto market and how it relates to its conservative stance on Americans’ retirement savings accounts.

  • More and more people seem to want to invest a bit in bitcoin and other cryptocurrencies, but the Employees Retirement Income Security Act of 1974 (ERISA) requires plan administrators to behave fairly towards retirees and offer them prudent investments.

Details: “Although designed as a compliance aid, the CAR [compliance assistance release] does not provide any constructive guidance as to how the plan trustees can resolve the issues identified by the Department and discharge their fiduciary duties in the valuation of cryptocurrencies,” wrote Dave Gray of Fidelity Investments in a letter dated April 12 at work. Gray leads the company’s workplace retirement offerings.

  • Among Fidelity’s objections to the guidelines, he noted that they “confuse a wide range of potentially very different investments.”
  • In other words, Fidelity believes that every coin or token is different.

two weeks later Gray’s Letter, Loyalty announcement it would free a retirement plan with bitcoin despite the strong language of advice.

  • The guidelines do not prohibit such plans. It just raises problems.

Catch up fast: Fidelity’s plan would offer a retirement plan option to its customers to allow their employees to invest a portion of their savings in bitcoin.

The other side: The labor market compliance assistance took aim at employee retirement programs that want to include cryptocurrencies, saying he “has serious concerns about the caution” of plans that expose workers to cryptocurrencies.

  • He noted concerns about market volatility, unsophisticated investors, valuation and other issues.
  • He went on to say that employers who try to offer such plans “should expect to be questioned.”

To note : Fidelity has announced that business intelligence firm Microstrategy (also biggest bitcoin holder of any publicly traded company) intends to be the first to offer the plan.

The last: While Ali Khawar, acting assistant secretary of the Benefits Security Administration, expressed serious doubts about Fidelity’s offer, he also told the WSJ that the guidelines could be canceled or modified if the market develops.

Quick take: Fidelity is explicit that employees cannot invest more than 20% of their savings in bitcoin, which sounds like a very specific figure they offered to negotiate with Labour.


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