Fidelity to let 401(k) customers add bitcoin to their ...

Starting later this year, Fidelity Investments customers holding a 401(k) account will have the opportunity to allocate a portion of their funds towards bitcoin, marking the first instance when a prominent retirement plan provider incorporates cryptocurrency into their offering.

On Tuesday, Dave Gray, who is the head of workplace retirement offerings at Fidelity, expressed the company’s belief that blockchain technology, which is the underlying technology of cryptocurrency, will have a significant impact on financial services. Fidelity, which is the biggest provider of retirement services in the nation and oversees plans for 23,000 employers, holds this perspective.

Although it’s considered highly unstable by most financial experts, bitcoin reached its highest price last year in part because more companies began accepting it as a form of payment. In another sign that cryptocurrency is gradually becoming a mainstream investment, Wall Street firms have created exchange-traded funds around crypto futures.

According to the Pew Research Center, approximately 40 million Americans, including approximately 43% of men aged 18 to 29, have invested in cryptocurrencies, despite the potential risks of volatile price fluctuations. Fidelity has estimated that around 80 million individual investors in the United States currently own or have previously invested in digital currencies.

Fidelity plans to limit the frequency with which account holders can purchase and sell bitcoin if they opt for the new option. The chosen employees’ bitcoin will be stored and supervised in a separate digital asset account, distinct from the primary 401(k) fund.

Despite the U.S. Department of Labor expressing “serious concerns” last month about employees introducing cryptocurrencies to their retirement accounts, Fidelity is still providing the option to invest in bitcoin. In a blog post published on March 10, Assistant Secretary Ali Khawar stated that department officials were apprehensive about the potential risks crypto presents to investors.

“Cryptocurrencies’ prices have been extremely volatile,” Khawar wrote. “For example, in just one day last December, the price of bitcoin dropped by more than 17%. These large swings can leave participants vulnerable to significant losses.”

Khawar expressed the opinion that companies should exercise caution and thoroughly consider before adding a cryptocurrency option for employees.

Senator Cynthia Lummis backs crypto for US retirement plans

Cynthia Lummis, the U.S. Senator and advocate for Bitcoin, believes that incorporating Bitcoin into their retirement plans would be beneficial for American residents, promoting a diversified approach.

Senator Lummis expressed her desire for Bitcoin and other crypto-assets to be included as standard components of diversified asset allocations for retirement funds, during her talk at the CNBC Financial Advisor Summit on June 29. This is aimed at safeguarding them against inflation.

She added that she would also like to witness people having the freedom to utilize Bitcoin and their preferred cryptocurrencies, given that they are secure and have successfully complied with the requirements of anti-money laundering and the Bank Secrecy Act.

Lummis stressed the significance of preserving a “varied asset allocation” and cautioned about the inflation dangers associated with government expenditures and currency creation.

“The Congress spends trillions and trillions of dollars, and is flooding our economy and the world economy with U.S. dollars, there’s no way that we cannot debase the value of the U.S. dollar.”

Although the Internal Revenue Service provided guidance on including crypto assets in retirement portfolios for U.S. citizens in 2014, the act of hodling digital assets in one’s retirement plan has remained a limited practice.

Many analysts remain doubtful of the trend, even though the first retirement plans that are friendly towards cryptocurrencies started to appear in 2020.

Senior vice president at Alliant Retirement Consulting, Aaron Pottichen, stated to CNBC on June 22 that there is still minimal inclination among plan sponsors to incorporate cryptocurrency into their investment portfolio.

In the interview, Lummis disclosed that she presently possesses a total of 5 BTC, acquiring her initial Bitcoin in 2013 for approximately $330. Despite her optimistic outlook on Bitcoin, she emphasized the importance of diversification and advised against going entirely into BTC.