Senator Elizabeth Warren Leads Inquiry Into Fidelity’s Bitcoin-Backed Retirement 401(k) Account

In the wake of the launch of a Bitcoin-focused 401(k) account- a retirement plan- in the United States by Fidelity Investments, two Senators – Elizabeth Warren of Massachusetts and Tina Smith of Minnesota, have expressed concerns over the company’s latest products and this was contained in a letter to the firm’s Chief Executive Officer, Abigail Johnson.


As contained in the Senator’s letter, a demand was placed on Abigail to explain some of the inherent risks that are associated with the launch of the Bitcoin-backed product to American workers. The senators demanded that Fidelity clarify the risks involved in the 401(k) investments and how the company will address these risks.

Additionally, the Senators demanded to know how the firm will address the susceptibility of Bitcoin to manipulation as well as “the additional Bitcoin risks identified by DOL, including the challenge for plan participants to make (an) informed investment.”

Fidelity’s push to extend the investment into 401(k) was said to be based on growing demand from employees. Despite the firm clarifying that it will charge no fees for the service, the Senators still demanded to know if the proposed customers would need to worry about any fees at all.

In the prior announcement, Fidelity said it would only permit about 20% of a particular client’s portfolio to be invested in digital currencies, however, the claim of popular demand has mainly been faulted by the Senators who wrote;

“Despite a lack of demand for this option — only 2% of employers expressed interest in adding cryptocurrency to their 401(k) menu – Fidelity has decided to move full speed ahead with supporting Bitcoin investments.”

It is not uncommon to find some Senators expressing dissatisfaction about anything relating to Bitcoin, drawing on the fact that it is a Proof-of-Work (PoW) coin with a high Carbon footprint. With Fidelity’s investment offering now being questioned, time will show whether true organic demands fueled the launch of the product or not.

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Fidelity Offers Bitcoin Portfolio Options to Retirement Investment via MicroStrategy

America’s largest retirement savings plans 401(k) provider, Fidelity Investments is set to permit the allocation of some of its client’s funds into Bitcoin (BTC), a move it said was based on popular demand.


As reported by the New York Times, the permission for subscribers to invest in Bitcoin-backed 401(k) plans is all dependent on whether the sponsors of the scheme favor such moves or not.

401(k) plans are a retirement savings scheme that is sponsored by an employer and supervised by the United States Department of Labor. Fidelity Investments controls over a third of the 401(k) plans in the US with more than $2.4 trillion held in such accounts as of 2020 per data from Cerulli Associates.

While the Department of Labor has expressed scepticism about the Bitcoin-hinged product, Fidelity said its move addresses some of the concerns of the regulator, including the room for employers to choose whether to subscribe to the fund or not. 

Despite these allowances granted to employers who will also determine the maximum allocation that can be injected into BTC, Fidelity said its defined limit will be pegged at 20% of the total funds from any individual 401(k) contributor. As of the time of writing, Bitcoin-savvy MicroStrategy has already been onboarded into the scheme according to Dave Gray, head of workplace retirement offerings and platforms at Fidelity Investments.

“We started to hear a growing interest from plan sponsors, organically, as to how could Bitcoin or how could digital assets be offered in a retirement plan,” he said.

The move from Fidelity complements efforts by American asset management firms to float a crypto-linked product that can be subscribed to by the broader public. Fidelity has done its best to float a Bitcoin spot Exchange Traded Fund (ETF) product, however, continuous rejection of such application from the US SEC has stalled its progress in this regard. The Bitcoin-linked 401(k) plan will serve as one of the viable alternatives for the asset manager in the meantime.

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US Labor Department Urges Caution over Crypto Investment in 401k Retirement Plans

The U.S. Department of Labor (DOL) on Friday warned employers and retirement plan providers to “exercise extreme care” before they consider cryptocurrency into their investment option for plan participants. - 2022-03-14T124356.531.jpg

The labor agency made such comments as part of its efforts focused on protecting the retirement savings of U.S. workers.

The DOL said that cryptocurrencies like Bitcoin and other digital assets such as non-fungible tokens, pose significant challenges and risks to 401(k) investors, including, financial loss, theft, and fraud.

The Labor Department disclosed that financial services companies have started marketing crypto investments to 401(k) plans as retirement-plan option in recent months.

The labor agency warned that employers who add crypto investments to their company 401(k) plans might easily go against their legal obligations to plan participants.

Ali Khawar, acting assistant secretary at the Employee Benefits Security Administration, talked about the development and said: “At this early-stage in the history of cryptocurrencies … the U.S. Department of Labor has serious concerns about plans’ decisions to expose participants to direct investments in cryptocurrencies or related products, such as NFTs, coins and crypto-assets.”

Investing in Cryptocurrency

In September last year, the U.S. Department of Labor started working on guidance related to cryptocurrency. But the latest move by the DOL shows that the agency has followed the footsteps of other U.S. federal regulators that have recently highlighted risks that cryptocurrencies present to investors. The U.S. Securities and Exchange Commission (SEC) has a regulatory focus on investor risks related to cryptocurrencies.

Although the current law does not prohibit investing cryptocurrencies in 401(k) plans, many labor lawsuits (including a recent wave) have challenged the structure of the plan investment lineup, resulting in several plan sponsors favouring safer and less exotic and or volatile investments.

There has been pressure on retirement plan providers to favor stable, transparent, and low-cost investments such as index funds to avoid potential litigation. Recent lawsuits have examined how the Employee Retirement Income Security Act of 1974 (ERISA) regulates alternative investments like private equity or hedge funds.

Investing in cryptocurrency and crypto funds—which are much less stable or transparent than mutual funds—may still be far away from the investment universe of an ERISA plan.


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Miami Mayor Francis Suarez to Take Part of his 401K Retirement Funds in Bitcoin

Miami Mayor Francis Suarez has doubled down again on his love for Bitcoin (BTC) in an interview with Real Vision, promising that he plans to take a part of his 401K retirement savings fund in the digital currency. 

“It’s a personal choice,” Suarez told Real Vision Managing Editor Samuel Burke. “I just think it is a good asset to be invested in. I think it’s one that’s obviously going to appreciate over time. It’s one that I believe in.” 

Suarez has already commenced plans to take the funds in Bitcoin, a move that will be largely complementary to his earlier move to take a part of his salary in BTC. From his stance with Samuel Burke, the receipt of the retirement funds in Bitcoin is billed to commence as early as 2022 as Suarez replied “Oh yeah! Definitely,” to a question that sought to know if the move will start next year.

Bitcoin is not in a good place at the moment as the digital currency has slumped by over 25% in the past month. Suarez said that his confidence in the digital currency and its underlying blockchain is unwavering despite this bad price outlook.

“Blockchain has succeeded so well because people have confidence in it,” Suarez said. “They have confidence in it because they see that it’s an open-source and an un-manipulatable system. And I think that is the source of the popularity and why it’s done so well.”

The interest in Bitcoin has pushed the Miami Mayor to introduce some innovative programs that are hinged on engrafting blockchain technology in the city. The mayor launched the Miami Coin project earlier this year, through which it hopes to distribute Bitcoin Yield to citizens. An additional forward-thinking move is that the city residents can receive their remunerations in Bitcoin, a pioneering move in the United States.

Miami and its re-elected mayor are undoubtedly a good force helping to push the adoption of digital currencies and blockchain technology into the mainstream.

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Pension provider partners with Coinbase to offer 5% exposure to crypto

United States-based retirement plan provider, ForUsAll, is joining forces with Coinbase to allow clients to invest up to 5% of their portfolio assets in cryptocurrencies.

The pension provider, which primarily serves small-to-medium-sized businesses, is working to offer exposure to more than 50 cryptocurrencies in a product called Alt 401(k).

The firm’s co-founder and chief investment officer, David Ramirez, acknowledged concerns regarding offering crypto products in pension portfolios due to their volatility, but argued that U.S. citizens will be at a “disadvantage” if they are not given the option of accessing crypto assets in their retirement plans:

“The average American may be at a structural disadvantage relative to large institutions and high net worth individuals, and we just don’t think that’s right.”

ForUsAll handles $1.7 billion in retirement plan assets, which accounts for a small portion of the $22 trillion retirement-account markets.

In the United States, a 401 plan is an employer-sponsored defined-contribution pension account defined in subsection 401 of the Internal Revenue Code.

Larger institutional investment firms such as Fidelity Investments and Charles Schwab do not allow customers to directly buy or sell cryptocurrency in taxable accounts or individual retirement accounts. However, they can purchase shares in trusts that do invest in crypto assets from companies such as Grayscale Investments.

Related: Fidelity’s Tom Jessop says crypto has hit a ‘tipping point’

One firm that does allow the direct purchase of crypto assets and gold for retirement plans is BitcoinIRA, which was founded in 2016. Commenting on ForUsAll’s collaboration with Coinbase, co-founder and chief operating officer at BitcoinIRA, Chris Kline, stated:

“ForUsAll and Coinbase wouldn’t be doing this if there wasn’t a market. There are people that want this with these types of funds. And they want to have access to new and exciting things with their 401(k)s.”

MicroStrategy CEO Michael Saylor responded to ForUsAll’s move to embrace crypto.

In April, Cointelegraph reported that pension funds and insurance firms have been increasingly dedicating part of their asset bases to Bitcoin and crypto assets as concerns over inflation escalated amid the coronavirus pandemic.

In May 2020, Kingdom Trust, a regulated custodian managing over $13 billion in assets, launched a retirement account supporting both Bitcoin and legacy assets.

The firm noted that when the Internal Revenue Service decided to tax Bitcoin, it directly enabled the asset to be held by qualified custodians and in retirement accounts.