Bitcoin crash. The Biden administration wants to keep him off his 401(k).

“The ambiance — YOLO and FOMO for cryptocurrency — is our concern,” Ali Khawar, Acting Assistant Minister of Labor, said in an interview. “Now, you don’t know whether to bet on the winning horse or not. It is very speculative.”

Fidelity — one of the leading old-school financial giants embracing cryptocurrency — is pushing ahead with this initiative as officials in Washington scramble to keep pace with the highly volatile $1.3 trillion crypto market. company decision It shows how Wall Street supporters are beginning to put pressure on the crypto industry’s battle to shape the policies that are now being written with the proliferation of virtual currency.

With 23,000 companies using Fidelity to retire their employees, the AARP and consumer advocates are also sounding the alarm that dumping crypto into their 401(k) could leave employers and workers with the bag. The Department of Labor is warning that companies that put cryptocurrency on their retirement plan rolls could be investigated for failing to act in the best interests of their employees.

“It’s very difficult to separate facts from hype — and there is a lot of hype,” said Micah Hauptmann, director of investor protection for the American Consumer Federation. Providing these assets to plan sponsors to include in their formations may increase their liability, which is not good for anyone. It’s not good for small businesses… It’s not good for their employees.”

Fidelity has been building its presence as a digital currency giant for nearly a decade, with a digital asset platform that includes everything from Bitcoin mutual funds to custodial services for institutional investors. The company last year led a new advocacy group – the Crypto Innovation Council – with fintech startups turned into the powerhouses of Block (formerly Square) and Coinbase.

Fidelity’s Bitcoin 401(k) announcement in late April came more than a month after the Labor Department warned against such a move.

DOL said in March that pension plan administrators could be investigated if they choose to invest their employees’ defined contribution plans in digital assets including Bitcoin.

Plan agents – usually employers – hold high standards of prudence when it comes to choosing the investment options available to their employees. Certain investments, such as collectibles and some precious metals, are prohibited. While DOL has stopped short of putting cryptocurrencies on a no-fly list, it does have “serious concerns about the wisdom” of digital asset investments. This means that the employer may be liable if the employee’s 401(k) goes bankrupt with bitcoin.

Notably, bitcoin is not yet planned as an option in any 401(k) where Fidelity acts as a fiduciary, Fidelity spokesperson Eric Sandwin said.

In a reply letter dated April 12, Dave Gray, Head of Workplace Products and Platforms, urged the Department of Labor to rescind his guidance or revise it saying it would not be wise to include cryptocurrencies in 401(k)s.

Fidelity’s Bitcoin 401(k) offering, which it plans to launch later this year, leaves the decision-making process for individual employees who choose to sign up for the program through their employer.

Khawar said the Labor Department issued its warning in part due to a lack of clarity on how to regulate digital assets and also due to concerns about scams, market manipulation, and other scams. There are no clear criteria for attaching valuations to digital assets and no rules on how plan administrators should maintain the immunity of retirees’ crypto holdings.

“We don’t know what regulatory changes will occur in this market, and who will adapt to it better or worse,” he said. “Even if I am a staunch supporter of cryptocurrency, I don’t think anyone has any certainty that bitcoin itself will be the currency that will succeed in ways that others do not.”

There are also questions about how Bitcoin or other digital assets fit into the context of typical 401(k) investment portfolios, which are created to leave retirees with a reliable income stream as they withdraw their savings. The AARP, an advocacy group for Americans over 50, argues that the recent catastrophic cryptocurrency decline is evidence that digital currency is too risky for retirement planning.

“It is a huge mistake to use crypto assets.” [for retirement plans]said David John, senior strategic policy advisor at the AARP Institute for Public Policy. “The past week to 10 days or so has proven us this point.”

Fidelity’s decision to move forward drew swift reprimands from Warren and the senator. Tina Smith (D-Minn.), who in a May 4 letter asked Fidelity CEO Abigail Johnson why the company failed to heed the Labor Department’s warning. The senators pointed to the extreme price swings, which they said were exacerbated by influences such as Tesla CEO Elon Musk. They also asked about a potential conflict of interest related to Fidelity’s foray into bitcoin mining.

“In short, investing in cryptocurrency is a risky and speculative gamble, and we are concerned that Fidelity will take that risk along with millions of Americans in retirement savings,” they said.

The day after Warren and Smith summoned the company, Tuberville introduced a “financial freedom act” that would prevent the Labor Department from restricting the types of investments allowed in self-directed 401(k) accounts. While Tuberville spokeswoman Ryan Durant said the senator’s staff met with Fidelity and crypto-trading groups prior to the bill’s passage, she said Fidelity played no role in crafting legislative language.

Traditional financial trading groups including the American Bankers Association and the Association of the Securities Industry and Financial Markets have thrown letters at the Labor Department questioning the guidelines and calling for revisions as well.

“The government has no position in the way of retired savers who want to make their own investment choices,” Tuberville said in a statement. “When you earn your salary, your decision should be how you invest your money. My legislation makes sure that is the case.”

Sandwin said the company has several safeguards in place for consumers including “excessive trading oversight, transparency, education, and cybersecurity features.”

“Fidelity looks forward to continuing the dialogue about this exciting offering with federal regulators and policy makers consistent with our approach to the many new services we offer our customers,” Sandwin said.

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