Fidelity, first retirement-plan provider to offer 401(k) investors access to bitcoin

Fidelity Investments announced Tuesday that it will make bitcoin available for retirement savings in 401(k) accounts, making it the first provider to offer crypto.

23,000 employers who use Fidelity for retirement account administration will be able to use the crypto offering by mid-year 2022. The nation’s largest retirement plan provider, Fidelity, has assets under administration of $11.3 trillion. Its decision could drive crypto even more mainstream and popular.

“There is growing interest from plan sponsors for vehicles that enable them to provide their employees access to digital assets in defined contribution plans, and in turn from individuals with an appetite to incorporate cryptocurrencies into their long-term investment strategies,” said Dave Gray, head of workplace retirement offerings and platforms at Fidelity Investments.

A retirement plan based on bitcoin will be offered for the first time by cloud and intelligence firm MicroStrategy. It was announced by the Wall Street Journal earlier Monday.

According to initial reports, Fidelity’s Bitcoin retirement plans will allow investors to allocate up to 20% of their accounts to this investment option, although that figure may change in the future. Furthermore, the employer will set the cap for Bitcoin investments.²³

The fees for Bitcoin-eligible accounts will range from 0.75 to 0.90%, depending on the amount invested and the employer. Additional fees, such as per-trade fees, may also apply.

Regulators have cautioned against involving cryptocurrencies in 401(k) plans. The Department of Labor has just warned fiduciaries to be extremely cautious when considering adding cryptocurrency to 401(k) plans’ investment options.

The Department of Labor expressed concerns about speculation, volatility, and high valuation. Meanwhile, it warned of major custodial and recordkeeping issues, saying simply losing or forgetting a password can result in the loss of the asset forever.

Digital Assets Accounts are custom plans that hold cryptocurrency and short-term money market investments to provide liquidity needed for the account to facilitate day-to-day transactions on behalf of investors.

To ensure institutional-grade security, the Fidelity Digital Assets custody platform will hold bitcoin in the DAA, said Fidelity.