TL;DR Breakdown
- Fidelity continues to make space for Bitcoin
- The company will make the pioneer crypto more mainstream
- The firm is confident it will cross all regulatory hurdles
Fidelity, officially Fidelity Investments Inc., is warming up even more to Bitcoin. According to reports, Fidelity has unveiled plans to add Bitcoin to its widely popular 401(k) plans.
Fidelity to allow investing retirement savings in Bitcoin
The Wall Street Journal (WSJ) notes that the firm’s Bitcoin retirement savings product will launch later this year. Bringing the option to over 23,000 employers that are its clients, the firm will become the first major 401(k) plan provider to offer Bitcoin in its retirement savings plan.
Fidelity says the fund will be structured differently from its other funds, which are mutual funds. Each plan sponsor will have a “dedicated digital assets account” for employees. These accounts would hold the Bitcoin and short-term money market investments for liquidity.
Additionally, Fidelity will hold the crypto with its institutional grade custody platform. While customers can choose how much to invest, Fidelity has capped the Bitcoin investment option at 20%. The financial services gaint also plans to issue educational material to help guide employers and employees alike.
Speaking in an interview, Dave Gray, Head of Workplace Retirement Offerings and Platforms at Fidelity, said that the multinational company strongly believes that blockchain technology will play a massive role in the future of the financial industry.
Fidelity believes that blockchain technology and digital assets are going to be a much larger part of financial industry’s future.
Dave Gray.
The Fidelity Bitcoin retirement savings plan offer already has its first customer, WSJ’s report noted. This is MicroStrategy, the enterprise software company that is currently the biggest institutional holder of Bitcoin. MicroStrategy’s CEO Michael Saylor has long been a supporter of Bitcoin.
The firm’s plans, meanwhile, have the potential to make Bitcoin adoption even more mainstream. Before now, there has been only one retirement savings plan provider that offers Bitcoin investments in its plan.
ForUsAll, a small-time 401(k) plan provider, had partnered with Coinbase to allow about 400 clients to invest retirement savings in Bitcoin.
Regulatory hurdles remain to cross for Fidelity.
The investment is not new to interacting with Bitcoin and blockchain technology. The company has several Bitcoin-centric products and services. These include Canada’s first institutional Bitcoin custody service and several physical-Bitcoin-backed exchange traded funds in Canada and Europe.
However, the latest service is bound to face multiple regulatory challenges in the U.S. Most of this is expected to come from the U.S. Department of Labor (DOL), which oversees employer retirement savings plans to ensure they meet standards set out by the Employee Retirement Income Security Act (ERISA).
Last month, the DOL put out a notice warning 401(k) plan providers about the dangers of adding cryptocurrencies to retirement savings plans. The agency maintained that cryptocurrencies were volatile and speculative.
However, the firm is confident that the structure and security of its offering will pass regulatory scrutiny. The firm is also banking on its track record with its other crypto services.
