Fidelity Investments will allow US investors to include a Bitcoin account in their retirement plans. These are so-called 401k, defined contribution pension funds funded directly from payments from paycheck and tax benefits. Fidelity is the largest provider of 401k retirement plans in the United States and is the first to announce such a move.
By the end of the year, it was The Wall Street JournalHowever, the 23,000 companies that use the asset management giant (with 10.4 trillion assets under management, ahead of Blackrock with 9.56 trillion) to manage their retirement portfolios will have the opportunity to expand the asset basket into bitcoin. Fidelity’s tipping point indicates how increasingly crypto investment is trending, but it remains to be seen whether employers will accept this proposal for their workers as well because just over a month ago, the US Department of Labor expressed concerns about including cryptocurrency in pension plans.
On the other hand, the current stage is complicated for conventional assets as the S&P 500 is down about 10% this year and bonds have been affected by higher interest rates. Moreover, volatility is also affecting Bitcoin, which has been in the 40% heat from its November highs. “We need a diverse set of investment products and solutions for our investors,” said Dave Gray, president of retirement offerings and platforms at Fidelity. “We fully expect cryptocurrency to shape the way future generations think about investing in the short and long term,” Gray added.
As reported by Wsj, Fidelity will allow savers to allocate up to 20% of their basket to Bitcoin, and Fidelity said that payments will initially be limited to this currency and then this possibility can be expanded to other digital currencies. Cryptocurrency investments have been virtually non-existent in 401k plans so far.
The company operates plans with more than 20 million participants and $2.7 trillion in assets. Fidelity also has a growing presence in the cryptocurrency industry, including a trading and custody platform launched in 2018, catering to hedge funds and other professional investors. Fidelity’s interest in cryptocurrencies began nearly a decade ago when Abigail Johnson, now president and CEO, began holding weekly internal meetings to discuss digital assets and blockchain technology. The company started mining bitcoins in 2015. Then, it added a link to retail customer accounts to Coinbase, the cryptocurrency platform, to track their holdings. In 2020, he opened a cryptocurrency fund for wealthy clients. The management firm estimates that approximately 80 million American investors own or invest in cryptocurrencies.
But “at this early stage in the history of cryptocurrencies, the US Department of Labor,” the agency wrote in a March 10 letter, “has serious concerns about plans decisions to expose participants to direct investments in cryptocurrency or related products, such as NFT and coins. Metal and cryptocurrency. Meanwhile, companies are also opposed to the fact that their employees rely on cryptocurrency in order not to jeopardize their retirement resources. About 2% of 63 employers in a recent survey conducted by the Planned Parenthood Council of America said they would consider adding cryptocurrency to their 401k list.
Proponents of the benefits of adding a small dose of cryptocurrency to a wallet say that this can increase expected returns without increasing the overall risk. Some argue that cryptocurrencies can act as a hedge against inflation. The focus on researching innovative assets to give an edge to the pension portfolios of 401K plans, which total more than $6 trillion in assets, has been going on for some time. Two years ago, the Trump administration gave the opportunity to invest in private equity and in this case, unlike what is happening today with Bitcoins, the Department of Labor gave its approval despite the appropriate diversification. (All rights reserved)