Warren Questions Fidelity on Plans to Allow Bitcoin Investments for 401(k) Plans
“Investing in cryptocurrencies is a risky and speculative gamble, and we are concerned that Fidelity would take these risks with millions of Americans’ retirement savings.”
“We are also concerned about Fidelity’s potential conflicts of interest and the extent to which they may have affected the decision to offer Bitcoin”
Washington, D.C. – U.S. Senator Elizabeth Warren (D-Mass.) a member of the Senate Banking, Housing, and Urban Affairs Committee, and Senator Tina Smith (D-Minn.), sent a letter to Abigail Johnson, CEO of Fidelity, regarding Fidelity’s decision to allow Bitcoin investments for 401(k) plans. In the letter, the Senators ask the company to explain why they have failed to heed the Department of Labor's (DOL) warning about 401(k) crypto investments and raise concerns about potential conflicts of interest presented by Fidelity being both a Bitcoin miner and a purveyor of Bitcoin.
“We write to inquire about the appropriateness of your company’s decision to add Bitcoin to its 401(k) investment plan menu and the actions you will take to address “the significant risks of fraud, theft and loss” posed by these assets,” wrote the lawmakers.
In recent months, DOL became aware of firms marketing investments in cryptocurrencies to 401(k) plans as potential investment options for plan participants. This spurred DOL to publish a Compliance Assistance Release in March reminding fiduciaries of their responsibilities under the Employee Retirement Income Security Act (ERISA) and highlighting the risks that cryptocurrency may pose to retirement accounts. The Department expressed “serious concerns regarding the prudence of a fiduciary’s decision to expose 401(k) plan’s participants to direct investments in cryptocurrencies” and cited “the significant risks of fraud, theft and loss” presented by these digital assets.
Despite DOL’s warning, Fidelity last week announced its Digital Assets Account, which will allow individuals to have a portion of their retirement savings allocated to Bitcoin through their 401(k) plan. If this proposed plan moves forward, workers at companies that participate could allocate up to 20% of their account balances into Bitcoin.
Fidelity has been a proponent of cryptocurrency for years and announced that they had begun mining cryptocurrency in 2015, an operation that, according to Johnson, “miraculously now is actually making a lot of money.” Because of this, the company’s decision regarding 401(k) Bitcoin investments presents additional conflict of interest concerns.
“We are also concerned about Fidelity’s potential conflicts of interest and the extent to which they may have affected the decision to offer Bitcoin,” the lawmakers continued. In addition to mining Bitcoin, Fidelity has expanded its crypto activities, “add(ing) a link on retail customers’ accounts to Coinbase, the crypto exchange, to track their holdings” and “open(ing) its own crypto fund for wealthy customers.” Now, Fidelity has become “the first to offer employers exposure to Bitcoin for the core lineup of 401(k)s.”
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