Friday, September 30, 2022

US Senators Questions Fidelity’s Bitcoin Backed 401(k) Product

Two Senators of the United States, Elizabeth Warren, and Tina Smith have raised concerns about the cryptocurrency-backed retirement savings plans of Fidelity Investments. According to a letter addressed to the CEO of the investment bank by the senators, a few questions were listed, of which they are demanding answers on or before the 18th of May.

Last month, Fidelity Investments announced to the US public that it is offering a Bitcoin (BTC) backed 401(k) retirement plan for its subscribers. Adding that the investment option is open to employers that will subscribe to the new initiative on behalf of their employees.

The Boston-based investment financial services firm is a big household name as it pertains to investment offerings in the United States. It manages the accounts of more than 20 million Americans and offers its 401(K) retirement option to 23,000 firms. 

After the announcement was made, Michael Saylor, the CEO of MicroStrategy, being a prominent name in BTC holdings was the first to hop in on the innovative move from Fidelity.

Drawing on the notice issued by the US Department of Labor (DoL) in March about the frail nature of digital assets, there have been concerns from the regulator and other governmental bodies on the cryptocurrency investment option for pensioners as instigated by Fidelity.

On the 28th of April, the Wall Street Journal (WSJ) reported that DoL has condemned the plans of Fidelity Investments to integrate cryptocurrency options in the 401(K) retirement plan of its American subscribers.

The acting secretary of EBSA said that the Labor Department has “grave concerns” about the decision that Fidelity has taken on behalf of its subscribers. He added that crypto investments are not substantial because there is too much hype around virtual assets, hence it does not qualify as an investment option for a retirement plan.

In the letter addressed to Abigail Johnson, the CEO of Fidelity Investments by the two senators, the inconsistent nature of bitcoin price was considered with facts and figures, noting that it is too risky for pensioners to use it for a reliable retirement investment, owing to the elastic nature of its price.

Further in the letter, a few questions were addressed to the CEO, which includes but are not limited to; “what are the specific volatility and loss risks posed by Bitcoin, and how will Fidelity address these risks?; what are the specific fraud risks posed by Bitcoin, and how will Fidelity address these risks?” and, “what are the specific theft risks posed by Bitcoin, and how will Fidelity address these risks?”

While responses are anticipated from Fidelity Investments, there have been comments and speculations on social media about the approach that the financial services firm is going to deploy in responding to the concerns of the government.

Israel Love
Israel Love is a passionate writer that enjoys educating and inspiring people through his writing. This passion fuels the desire to simplify the complexities in the blockchain ecosystem, by providing viable information about the crypto space in such a way that makes it easy for anyone to understand. Israel love also has interests in Human Resource Management as he is a trained expert in HR.

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