Key Words: Sen. Elizabeth Warren questions Fidelity’s ‘risky and speculative’ plan to offer bitcoin in 401(k)s

United States

Sen. Elizabeth Warren voiced concerns about Fidelity Investments’ plan to include bitcoin in customers’ 401(k) accounts, calling it “a risky and speculative gamble.”

In a letter dated Wednesday to Fidelity CEO Abigail Johnson, Warren, D-Mass., and co-author Sen. Tina Smith, D-Minn., expressed concern about potential conflicts of interest — Fidelity started mining bitcoin in 2017 — and questioned why the company ignored a Labor Department statement from March that laid out “serious concerns” about exposing 401(k) accounts to cryptocurrencies,  citing “the significant risks of fraud, theft and loss.”

“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.”

— Sens. Elizabeth Warren and Tina Smith

Noting bitcoin’s extreme volatility, which they said is compounded by the fact that its price can move on the “whims” of a handful of powerful influencers — specifically mentioning Elon Musk — the senators asked Fidelity: “What are the specific volatility and loss risks posed by bitcoin, and how will Fidelity address these risks?”

More: Opinion: I’m a financial adviser, and I’d discourage you from putting bitcoin in your 401(k)

They also asked for details on how Fidelity will address fraud and theft risks, about fees customers may incur if they invest in bitcoin, and questioned Fidelity’s fiduciary duties.

“When Fidelity made its decision to allow sales of bitcoin in retirement accounts, how did the company address its own conflicts of interest, given that the company now is both a bitcoin miner and a purveyor of bitcoin?” they asked.

Also see: Elizabeth Warren tells Senate hearing on banks: ‘They are still squeezing families on overdraft fees’

In a statement to the media Thursday, Fidelity responded: “As a Massachusetts-based company with a proven 75-plus-year history of doing what’s in the best interest of our customers, we look forward to continuing our respectful dialogue with policy makers to responsibly provide access with all appropriate consumer protections and educational guidance for plan sponsors as they consider offering this innovative product. Consistent with our ongoing dialogue with regulators and policy makers, we will respond directly.”

Fidelity announced last week it intends to allow customers to add bitcoin to their 401(k) accounts later this year, the first major retirement-plan company to do so. Fidelity said it would cap bitcoin allocations at 20%, though a Labor Department response laying out its “grave concerns” led to speculation that the maximum amount would be lowered. Fidelity said it would only offer bitcoin investments at first, but would likely expand to offer other cryptocurrencies in the future.

The price of bitcoin BTCUSD, -0.46% has sunk 22% year to date, and is down 37% over the past 12 months, according to Coindesk data, compared to the S&P 500’s SPX, -3.56% 13% loss this year and 1.3% decline over the past year.