Fidelity, the leading provider of retirement savings plans in the US, is to add Bitcoin (BTC) to its investment options. Depending on their company, Americans will then be able to put up to 20% of their savings account into cryptocurrencies by the middle of this year.
Fidelity proposes investing in Bitcoin for retirement
Fidelity has announced that by the middle of this year 2022, the so-called 401(k) retirement savings plans it offers will include the ability to invest in Bitcoin and other cryptocurrencies.
A 401(k) plan is a tax facility in the United States, where an employee can make the choice to put a portion of their salary into different investment vehicles. By doing so, this portion of income will be deducted from the tax liability for the current year, so income tax will only be due when the investment is withdrawn at retirement age.
Fidelity is the leading provider of 401(k) plans to businesses and had more than a third of the market in 2020 with $2.4 trillion in assets under management.
Employers under contract with Fidelity will then be able to offer their staff the opportunity to invest part of their savings in Bitcoin if they wish. For the time being, this will not exceed 20% of the total allocation and an account fee of between 0.75% and 0.9% per annum will be applied, in addition to the trading fee.
According to Dave Gray, head of corporate pensions, this new investment option is driven by demand from various players in his industry:
“We’ve started to hear growing interest from plan sponsors, organically, about how Bitcoin or […] digital assets could be offered in a retirement plan. “
Department of Labor remains on guard
While the Labor Department has not banned cryptocurrencies in 401(k) plans, on March 10, it had warned the various providers. Indeed, it had reminded them that they were required to act solely in the financial interest of their clients.
In these warnings, we will find the usual arguments concerning volatility, the risk of theft or the lack of experience of investors. Dave Gray commented that:
“The Department of Labor is substituting its own opinion on cryptocurrency for what rightly belongs to the trustees of plan sponsors. “
It also informed that Fidelity would be incorporating educational materials into its offering, and that the custody of assets, meanwhile, would have “institutional-level security.”
Unsurprisingly, MicroStrategy has already signed up for Fidelity’s offering on behalf of these employees.
The arrival of cryptocurrencies in 401(k) plans is great news for the democratisation of our ecosystem. And for good reason, the American system is such that employees there have to build their own retirement. So this type of investment is very common.
However, if this is an interesting gateway to the blockchain universe for a novice, it will not change anything for someone experienced.
Indeed, the catalogues of investment products in 401(k) plans often depend on the will of employers, not to mention the management fees. So someone who really wants to get into crypto-currencies will be better off investing directly.
