Fidelity, the nation’s largest provider of 401(k) plans, said Tuesday it would allow its participants to put some of their retirement money into Bitcoin — if their employers are willing to allow it.
The announcement could bring millions of people closer to direct investment in Bitcoin this summer without having to open an account on a cryptocurrency exchange. But regulators have already said they’re skeptical of the idea: Last month, the Department of Labor, which oversees retirement plans in the workplace, said it would critically monitor plans that add digital assets to their investment menus.
Fidelity — which owned $2.4 trillion in 401(k) assets in 2020, or more than a third of the market, according to research firm Cerulli Associates — said it was introducing a digital asset account to hold Bitcoin. The account fee will be between 0.75 percent and 0.90 percent of the assets, depending on several factors, including the employer and the amount invested. An additional trading fee, not yet disclosed, will be “competitively priced,” the company said.
“We started hearing a growing interest from plan sponsors, organically, about how Bitcoin or how digital assets can be offered in a retirement plan,” Dave Gray, head of retirement offerings and workplace platforms at Fidelity Investments, said in an interview.
MicroStrategy, a business analytics firm, has already signed up, Mr. Gray said, and Fidelity is in talks with other employers.
The digital asset account will be generally available in the middle of this year, Fidelity said. It will be integrated into the 401(k) investment menu just like more traditional mutual funds; for example, investors can choose to spend a certain percentage of their contributions to the Bitcoin account. That percentage is capped: The employer sets the cap, but the platform won’t allow assignments greater than 20 percent, although that number can change.
A growing number of traditional investment options that provide cryptocurrency exposure have recently entered the market, including a range of exchange-traded funds last year. But Fidelity’s move is more striking because it would allow Americans to bet with their sacred retirement money on the emerging and highly volatile sector.
The Labor Department didn’t go so far as to ban crypto from retirement plans when it released a compliance support document last month, but it reminded plan overseers—often the employer, who must act solely in the best interests of participating employees—that they are responsible for choosing “cautious” options. And it strongly suggested that cryptocurrencies didn’t seem to meet that bar yet.
“These investments pose significant risks and challenges to participants’ retirement accounts, including significant risks of fraud, theft and loss,” the department said in its compliance release. It added that it would conduct a research program targeting schemes that offered crypto and related investments.
The agency said pension investors could misunderstand the risks of cryptocurrencies and raised concerns about valuation, custody and filing procedures.
A guide to cryptocurrencies
In a letter to the Labor Department this month, Fidelity said the agency had not provided guidance on how plan fiduciaries should address these concerns or fulfill their duties when considering plan investments in cryptocurrencies. The company urged the department to work with planning overseers to develop steps to meet those commitments.
“The Department of Labor is substituting its own view of crypto for what rightly belongs to the fiduciaries of plan sponsors,” said Mr. Gray, who said Fidelity’s new account alleviated many of the agency’s concerns.
Fidelity said the digital account, for example, would be valued daily and kept on its own custodial platform to ensure “institutional-grade security” — and that robust educational materials were baked into the offering.
But there’s little that can be done about Bitcoin’s volatility: After peaking at nearly $69,000 on November 9, it recently traded at around $40,000.
While Fidelity is best known for its massive retirement business, it was one of the earliest entrants to the cryptocurrency space. In 2018, it started offering trading and custody of digital assets for major institutional clients, and in 2020 it introduced a private Bitcoin fund for so-called accredited investors. The Fidelity Advantage Bitcoin ETF became available in Canada late last year.
