US Department of Labor at Odds with Fidelity’s Bitcoin Pension Plan
2022.05.02 13:52
US Department of Labor at Odds with Fidelity’s Bitcoin Pension Plan
- A senior agency official said he raised concerns about such plans given the volatility and risks that cryptocurrencies pose.
- The pension fund management company argues that this step only seeks to expand the supply of digital assets available and constantly growing.
The Department of Labor takes issue with Fidelity Investments’ pension plan, which allows investors to hold Bitcoin in their 401(k) accounts. Officials consider these kinds of offers to pose a huge security risk to American retirees.
“We have grave concerns with what Fidelity has done,” Acting Assistant Secretary of the Employee Benefits Security Administration Ali Khawar told The Wall Street Journal.
We are not talking about millionaires and billionaires
Khawar, whose department is charged with regulating corporate retirement plans, added that “For the average American, the need for retirement savings in their old age is significant.” He further emphasized that “We are not talking about millionaires and billionaires that have a ton of other assets to draw down.”
Both the senior official and his department regard Bitcoin as a speculative currency. Khawar further noted that there is “a lot of hype around ‘You have to get in now because you will be left behind otherwise.'”
During the interview, Khawar revealed that he received the notification of the Fidelity plan just one day before the company announced its offer to allow the more than 23,000 companies that use its 401(k) services to have the option of saving in Bitcoin for their employees.
The Adoption of Bitcoin Is Popular
Fidelity reported on April 26 that by the end of the year, workers will have the option to put up to 20% of their savings into cryptocurrencies, although employers have the power to reduce this percentage.
As the enthusiasm for cryptocurrencies grows, businesses, local governments, and individual users are increasingly embracing the use of digital money in various business and work activities.
However, skepticism persists among the business community regarding cryptocurrencies due to their high volatility and the lack of a regulatory framework that offers them greater security.
Given the growing use of cryptocurrencies in the US, the Biden administration recently ordered federal agencies to prepare reports on the risks and benefits of digital money as soon as possible to make a determination on its use and regulation.
“Continuous Commitment of the Company to Evolve”
Fidelity responded to the Department of Labor, saying its proposal to use Bitcoin “represents the firm’s continued commitment to evolving and broadening its digital assets offerings amidst steadily growing demand for digital assets across investor segments.”
The company added that “this technology and digital assets will represent a large part of the financial industry’s future.”
Although the current plan targeting Fidelity-affiliated businesses is limited to Bitcoin only, the firm’s head of workplace retirement offerings and platforms, Dave Gray, said this week that other cryptocurrencies will be added in the future.
The company launched its 401(k) account management offering, which covers some 20 million participants, after the March 10 release of guidance from the Department of Labor expressing concern about 401 (k) plans related to cryptocurrencies.
On The Flipside
- The volatility and loss of value of Bitcoin in recent months (around 40% since November) is the main source of concern for the government agency.
- The Department of Labor warns that there is no accepted valuation methodology that allows investors to confidently assess the prices of crypto assets.
Why You Should Care
- In addition to Fidelity, the Labor Department is concerned about a similar offering from ForUsAll, another 401(k) account provider associated with Coinbase (NASDAQ:COIN).
- The company last year announced a plan to allow workers affiliated with its retirement plans to invest in crypto assets up to 5% of their 401(k) contributions.
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