Fidelity Investment is now the first major retirement planner to allow investors to allocate a portion of their retirement savings to bitcoin through their 401(k)s.
The financial services provider said MicroStrategy Inc, a major bitcoin backer, will be the first employer to onboard the new product, which will then be made available to other employers by mid-year. reports Reuters.
According to Fidelity, employees will be able to hold bitcoin through a digital asset account (DAA) as part of their basic investment options on their 401(k) plans.
The adoption of the digital asset account was made in response to increased demand from investors. For example, Newfront, a provider of retirement advisory services, has indicated that the DAA will respond to customer demand.
Fidelity also added that plan sponsors will be able to schedule employee contributions to the DAA and allocate limits on the exchange of those contributions into bitcoin, adding that further updates or adjustments to the new offering will be available in the coming months. coming.
Dave Gray, head of workplace retirement offerings and platforms at Fidelity, says the plan will initially only focus on the bitcoin cryptocurrency, but he anticipates that other digital assets will eventually be made available.
“Plan sponsors are increasingly interested in vehicles that allow them to provide their employees with access to digital assets in defined contribution plans, and in turn from those willing to integrate crypto- currencies in their long-term investment strategies,” Gray told CNBC.
Nonetheless, regulators have warned against allowing cryptocurrencies in 401(k)s. The Department of Labor has asked plan trustees to “exercise extreme caution” before adding cryptocurrencies to 401(k) investment menus for participants. Regulators are concerned about speculation and volatility as well as high valuation, all of which can contribute to undue risk with a retirement account. Additionally, cryptocurrencies can lead to major custody and record-keeping issues, as losing or forgetting a password can result in the permanent loss of the asset.
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