Several US Senators have called on Fidelity Investments to reconsider allowing bitcoin in 401(k) retirement plans. “The recent implosion of FTX, a cryptocurrency exchange, has made it abundantly clear that the digital asset sector is in serious trouble,” lawmakers told Fidelity CEO Abigail Johnson.
US Senators Want Fidelity To Stop Offering Bitcoin In Retirement Plans
Three US senators on Monday sent a letter to Fidelity Investments CEO Abigail Johnson regarding the financial services firm’s bitcoin offerings in 401(k) retirement plans. The letter was signed by Senators Elizabeth Warren (D-MA), Richard J. Durbin (D-IL) and Tina Smith (D-MN).
Reiterating their concerns about Fidelity allowing bitcoin exposure in retirement plans, the lawmakers emphasized, “Once again, we strongly urge Fidelity Investments to reconsider its decision to allow 401(k) plan sponsors to expose participants to the bitcoin plan”.
They detailed, “Since our previous letter, the digital asset sector has only gotten more volatile, tumultuous and chaotic – all characteristics of an asset class that no plan sponsor or person saving for retirement should want to approach.” The Senators continue:
The recent implosion of FTX, a cryptocurrency exchange, has made it abundantly clear that the digital asset sector is in serious trouble. The industry is filled with charismatic prodigies, opportunistic scammers, and self-proclaimed investment advisers who promote financial products with little or no transparency.
Cryptocurrency exchange FTX filed for Chapter 11 bankruptcy on November 11. The company allegedly mishandled client funds and is currently under investigation by several US authorities, including the Department of Justice ( DOJ), the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).
“Consequently, the reckless, deceptive and potentially illegal actions of a few have a direct impact on the valuation of bitcoin and other digital assets,” lawmakers warned. “As the full extent of the damage caused by FTX continues to unfold, the contagion is being felt across the broader digital asset market. Bitcoin is no exception.”
“In light of these risks and the continued warning signs, we again urge Fidelity Investments to do what is best for plan sponsors and plan participants: seriously reconsider its decision to allow plan sponsors to offer bitcoin exposure to participants in the plan,” lawmakers told Johnson, elaborating:
In many respects, we are already in a pension security crisis and it should not be exacerbated by exposing retirement savings to unnecessary risk. Any investment strategy based on catching lightning in a bottle, or motivated by the fear of missing out, is bound to fail.
Fidelity’s decision to offer bitcoin investments in 401(k) plans has upset the US Department of Labor. “We are seriously concerned about what Fidelity has done,” said Ali Khawar, acting assistant secretary of the Labor Department’s Employee Benefits Security Administration. Treasury Secretary Janet Yellen also warned that cryptocurrencies are “very risky,” noting that they are not suitable for most retirees.
Senator Warren previously sent a letter to Johnson earlier this year asking for answers on the finance firm’s decision to allow bitcoin exposure in retirement products. In September, a number of US lawmakers introduced a bill called the Retirement Savings Modernization Act to allow “workers to diversify activities” in 401(k) plans.
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