\n<\/p>\n
\u201cThe atmospherics \u2014 the YOLO and the FOMO of cryptocurrency \u2014 are our concerns,\u201d Labor Department Acting Assistant Secretary Ali Khawar said in an interview. \u201cRight now, you don\u2019t know whether you\u2019re betting on the winning horse or not. It\u2019s very speculative.\u201d<\/p>\n
Fidelity \u2014 one of the most prominent old-school financial giants to embrace digital currency trading \u2014 is forging ahead with the initiative as Washington officials scramble to keep up with the highly volatile $1.3 trillion crypto market. <\/b>The company\u2019s decision <\/b>shows how Wall Street stalwarts are beginning to lend their lobbying muscle to the crypto industry\u2019s fight to shape policies that are just now being written as virtual currency goes mainstream.<\/p>\n
With 23,000 companies using Fidelity for their employees\u2019 retirement, AARP and consumer advocates are also sounding the alarm that throwing crypto into 401(k)s could leave employers and workers holding the bag. The Labor Department is cautioning that businesses that put crypto on their retirement plan menus could be investigated for failing to act in their employees\u2019 best interests. <\/p>\n
\u201cIt\u2019s very difficult to separate the facts from the hype \u2014 and there\u2019s a lot of hype,\u201d said Micah Hauptman, director of investor protection at the Consumer Federation of America. \u201cOffering these assets to plan sponsors to include in their lineups could be increasing their liability, and that\u2019s not good for anybody. It\u2019s not good for small businesses \u2026 it\u2019s not good for their employees.\u201d <\/p>\n
Fidelity has been building a presence as a crypto juggernaut for almost a decade, with a digital asset platform that includes everything from Bitcoin mutual funds to custodial services for institutional investors. The company last year spearheaded a new advocacy and lobbying group \u2014 the Crypto Council for Innovation \u2014 with fintech startups-turned-powerhouses Block (formerly Square) and Coinbase.<\/p>\n
Fidelity\u2019s Bitcoin 401(k) announcement in late April came more than a month after the Labor Department warned against such a move.<\/p>\n
DOL in March said retirement plan administrators could be investigated<\/a> if they opted to invest their employees\u2019 defined contribution plans in digital assets including Bitcoin. <\/p>\n Plan fiduciaries \u2014 usually employers \u2014 are held to particularly high standards of prudence when it comes to choosing what investment options are available for their employees. Some investments, such as collectibles and certain precious metals, are prohibited. While DOL stopped short of throwing crypto on a no-fly list, it has \u201cserious concerns about the prudence\u201d of digital asset investments. That means the employer could be liable if an employee\u2019s 401(k) Bitcoin holdings go bust. <\/p>\n Notably, Bitcoin is not yet planned as an option in any 401(k)s where Fidelity acts as a fiduciary, Fidelity spokesperson Eric Sandwen said.<\/p>\n In an April 12 response letter, Fidelity Head of Workplace Products and Platforms Dave Gray urged the Labor Department to rescind its guidance or revise it to say that it is not imprudent to include crypto in 401(k)s. <\/p>\n Fidelity\u2019s Bitcoin 401(k) offering, which it plans to launch later this year, leaves the decision-making to individual employees who opt into the program through their employer. <\/p>\n The Labor Department issued its warning in part because of the lack of clarity around how digital assets will be regulated as well as because of concerns about scams, market manipulation and other fraud, Khawar said. There aren\u2019t clear benchmarks for attaching valuations to digital assets nor are there rules around how plan administrators maintain custody of a retiree\u2019s crypto holdings.<\/p>\n \u201cWe don\u2019t know what regulatory changes are going to happen in this market, and who\u2019s going to adapt to them better or worse,\u201d he said. \u201cEven if you are a strong proponent of cryptocurrency, I don\u2019t think anyone has any certainty that Bitcoin itself is going to be the coin that succeeds in ways that others don\u2019t.\u201d<\/p>\n There are also questions about how Bitcoin or other digital assets would fit in the context of typical 401(k) investment portfolios, which are constructed to leave retirees with a dependable stream of income as they draw down their savings. AARP, the advocacy group for Americans over 50, argues that crypto\u2019s recent catastrophic downturn<\/a> is evidence digital currency is too dangerous for retirement planning.<\/p>\n \u201cIt is a horrible mistake to use crypto assets [for retirement plans],\u201d said David John, senior strategic policy adviser at the AARP Public Policy Institute. \u201cThe last week to 10 days or so proved that point for us.\u201d <\/p>\n