In late April, Fidelity Investments opted to disregard specific guidance issued by the Department of Labor (DOL) when it announced its plan to allow investors to include Bitcoin as part of their retirement plans. In doing so, the massive asset management firm waded into the matter of federal crypto regulation.
The month before, the DOL issued guidance for the retirement investment industry, cautioning firms like Fidelity to “exercise extreme care” before adding cryptocurrency to 401(k) plans.
On Wednesday, Sen. Elizabeth Warren (D-Mass.) took action.
Warren and Sen. Tina Smith (D-Minn.) sent a letter to Fidelity CEO Abigail Johnson about the new plan, and they sound worried. “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,” the senators wrote.
Fidelity’s new crypto offering is set to be available midyear via Digital Assets Accounts—part of investors’ 401(k) plans. The accounts would potentially enable millions of investors to invest in crypto without needing to involve themselves with any digital asset exchange. According to Fidelity, employers will be able to set their own limits on how much employees can contribute to Bitcoin, but the firm itself will impose an allocation max of 20%.
As crypto has gone more mainstream in recent years, federal involvement in its regulation has emerged as a partisan topic of debate. For instance, Hester Peirce, currently the only Republican commissioner on the Securities and Exchange Commission, has been dubbed “crypto mom” for her anti-regulatory stance.
And today, Sen. Tommy Tuberville (R-Ala.), published an op-ed with CNBC arguing specifically in favor of cryptocurrencies being made available as part of 401(k) plans. In the op-ed, he wrote that the DOL’s guidance represents a violation of investors’ rights to make their own investment decisions.
Tuberville also announced in the op-ed that he is introducing a bill called the Financial Freedom Act, which would prohibit the DOL from issuing guidance or regulations relating to investment accounts with brokerage windows, which allow investors to self-select investments.
“The agency’s new guidance ends this tradition of economic empowerment in favor of big-brother government control,” wrote Tuberville, referring specifically to the freedoms that brokerage windows provide for individual investors.
In their letter, Warren and Smith specifically call out Bitcoin’s volatility, citing the cryptocurrency’s high of $69,000 last November that fell to $33,000 two months later. They also highlight Bitcoin’s “susceptibility to the whims of just a handful of influencers,” in part referencing Elon Musk’s ability to sway the market with just his tweets.
The senators outline additional areas of concern, including the fact that crypto regulation itself remains in flux.
They also write that Fidelity’s updated 401(k) offering might pose a possible conflict of interest. The firm announced in 2017 its decision to mine Bitcoin, later adding a link for customers’ accounts to Coinbase and establishing a crypto fund for wealthy investors.
Warren and Smith posed a series of questions in their letter “to better understand how Fidelity arrived at this decision.”
The senators requested answers from Fidelity by May 18.
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