Senator Elizabeth Warren, along with fellow Democrat Senator Tina Smith, has questioned Fidelity’s plan to allow investors to put bitcoin into their 401(k) retirement savings accounts, following similar concerns raised by the U.S. Department of Labor.
Senators Ask Fidelity to Weigh the Risks of Bitcoin Investment
In a letter to Abigail Johnson, CEO of asset management giant Fidelity Investments, on May 4, Senators Warren and Smith questioned the “appropriateness” of the company’s plan to let people invest a part of their 401(k) into an asset as risky as bitcoin.
The letter pointed out bitcoin’s volatile nature and also asked how Fidelity was going to tackle other risks such as fraud, theft, and loss. According to the Senators:
“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.”
Furthermore, the politicians argued that the company had “potential conflicts of interest,” which they believe could have affected Fidelity’s bitcoin decision. The letter pointed out that the asset manager has been involved in bitcoin and ethereum mining in the past, and also launched a Bitcoin Index Fund, for qualified investors, with a minimum investment threshold of $100,000.
Meanwhile, the Senators’ inquiry follows similar concerns expressed by the Department of Labor (DOL). According to the acting assistant secretary of the Employee Benefits Security Administration Ali Khawar, crypto is a speculative asset with a lof hype and FOMO (fear of missing out).
Khawar also noted cryptocurrency’s volatility and said that it needs “maturing” before allowing people to put their retirement savings into the asset class.
Before Fidelity’s announcement, the DOL in a press release back in March asked fiduciaries to exercise caution before considering adding the crypto as an investment option to a 401(k) plan.
Fidelity to Respond to Senators’ Inquiry in Two Weeks
Senators Warren and Smith, meanwhile, asked Fidelity why it disregarded the DOL’s concerns in March. Other questions posed by the politicians include fees incurred by customers as a result of their bitcoin investment, how much the asset manager has earned since it began crypto mining operations in 2017, and how Fidelity addressed the conflicts of interest.
The company is expected to respond to the questions in the letter by May 18, 2022. According to the Wall Street Journal, a statement by Fidelity said:
“As a Massachusetts-based company with a proven 75-plus-year history of doing what’s in the best interest of our customers, we look forward to continuing our respectful dialogue with policy makers to responsibly provide access with all appropriate consumer protections and educational guidance for plan sponsors as they consider offering this innovative product. Consistent with our ongoing dialogue with regulators and policy makers, we will respond directly.”
Binance Free $100 (Exclusive): Use this link to register and receive $100 free and 10% off fees on Binance Futures first month (terms).
PrimeXBT Special Offer: Use this link to register & enter POTATO50 code to receive up to $7,000 on your deposits.