Senators Raise Concerns About Bitcoin in Retirement Plans

Several U.S. Senators have sent a letter requesting answers from Fidelity on their decision to allow plan sponsors to offer participants exposure to bitcoin.

By DJ Shaw



Fidelity Investments announced in April that it would allow individuals to have a portion of their retirement savings allocated to bitcoin through their retirement plans, leading to praise from some corners and questions from others regarding whether the move is appropriate from a fiduciary standpoint.

Now, U.S. Senate Majority Whip Dick Durbin, D-Illinois, and Senators Elizabeth Warren, D-Massachusetts, and Tina Smith, D-Minnesota, have also taken notice, sending an open letter requesting answers from Fidelity on their decision to allow plan sponsors to offer participants exposure to bitcoin. In their letter, the Senators called the digital asset “unregulated and highly volatile.”

“We write today to ask why Fidelity, a trusted name in the retirement industry, would allow plan sponsors the ability to offer plan participants exposure to Bitcoin,” the letter states. “While plan sponsors ultimately are responsible for choosing the investments available to participants, it seems ill­ advised for one of the leading names in the world of finance to endorse the use of such a volatile, illiquid and speculative asset in 401(k) plans—which are supposed to be retirement savings vehicles defined by consistent contributions and steady returns over time.”

The Senators questioned why Fidelity would allow those who can save to be exposed to the untested, volatile asset when saving for retirement is already a challenge for so many.

In a statement, Fidelity said its clients continue to have strong interest in digital assets and the blockchain.

“We are proud of the Digital Assets Account as a responsible solution to meet the demands of mainstream interest. In fact, client interest has not only been strong, but also spans across a wide range of industries and company sizes. We are on track to launch our first plan sponsor clients this fall,” the statement says. “We are continuing our respectful dialogue with policymakers to responsibly provide access with all appropriate consumer protections and educational guidance for plan sponsors as they consider offering this innovative service. Consistent with our ongoing dialogue with regulators and policymakers, we are working with them directly.”

For their part, the Senators argued that Fidelity and its peer organizations should focus on solving more fundamental problems.

“Those fortunate enough to have access to a retirement plan may be unable to find space within their household budget to contribute to an employer-sponsored plan, and they may feel that their wages would be better directed to household essentials such as housing costs, childcare, food or transportation,” the letter states. “Some workers, especially younger workers just entering the workforce, might not see the value of participating in an employer-sponsored plan, or may consider retirement a problem worth addressing later in their working life. The above issues are legitimate, complex problems within our retirement system.”

The letter raises various concerns about potential risks and financial dangers posed by digital assets such as bitcoin, noting that the asset topped out at $68,000 in November 2021 before dropping to around $20,000—more than two-thirds off its peak.

“While we appreciate Fidelity’s efforts to help working Americans realize a more secure retirement, this decision is immensely troubling,” the letter continues. “Perhaps most troubling is that in pointing to the risks of investing in Bitcoin on its website and planning to cap plan participants’ Bitcoin exposure to 20%, Fidelity is acknowledging it is well aware of the dangers associated with investing in Bitcoin and digital assets—yet is deciding to move ahead anyway. Retirement accounts must be held to a higher standard, one that Bitcoin and other unregulated digital assets fail to meet. This asset class is unwieldy, immensely complex, unregulated and highly volatile. Working families’ retirement accounts are no place to experiment with unregulated asset classes that have yet to demonstrate their value over time.”

The Senators acknowledged that the underlying technology of blockchain shows promise and has the potential to be used for “innovative and exciting applications,” but they warned that consumers must be wary of the risks associated with bitcoin and other digital assets.

Separately, the U.S. Department of Labor’s Employee Benefits Security Administration has previously published compliance assistance for 401(k) plan fiduciaries considering plan investments in cryptocurrencies, cautioning plan fiduciaries to exercise “extreme care” before they consider the digital assets as options for an investment menu for plan participants.

As EBSA has noted, the Employee Retirement Income Security Act of 1974 requires plan fiduciaries to act solely in the financial interests of plan participants and adhere to the standards of professional care in considering investment options for participants in 401(k) plans.

“At this stage of cryptocurrency’s development, fiduciaries must exercise extreme care before including direct investment options in cryptocurrency,” said Employee Benefits Security Administration Acting Assistant Secretary Ali Khawar.

In June, the U.S. House Committee on Education and Labor heard testimony from Labor Secretary Marty Walsh, where he discussed the DOL’s guidance on crypto in retirement.

“We made a recommendation because we were concerned about employees having 20% of their retirement savings put in cryptocurrency,” Walsh said. “Our role is to make sure that we’re protecting the rights of American workers and the investments going in.”

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