US citizens can now invest up to 20% of their pension funds in Bitcoin through Fidelity’s new retirement plan.
Fidelity Investments, the world’s fourth-largest asset manager with over $4.2 trillion in assets under management, said today that its 401(k) program will now allow its clients to invest in Bitcoin as an alternative investment.
Savings in Bitcoin at Fidelity
Americans can now invest for their retirement in Bitcoin.
Following the publication of a Wall Street Journal report on Tuesday, it was revealed that Fidelity Investments will allow customers to deposit Bitcoin into their tax-deferred 401(k) retirement plans as long as their employers allow it. Bitcoin deposits at Fidelity would be capped at a maximum of 20%, and employers could lower the restriction even further.
These plans allow employees to save for retirement by deducting contributions directly from their payroll, with the option for their employer to match their contributions up to a specified limit or percentage. Fidelity may become the first major retirement plan provider to allow savers to invest in Bitcoin as a result of the new program.
However, the new Fidelity model has certain shortcomings. On March 10, the United States Department of Labor issued a memorandum expressing “serious concern” about the exposure of 401(k) plan participants to direct investments in cryptocurrencies through their retirement plans. Among these people are those who are approaching retirement and those who have made large investments in bitcoin. In addition, the agency raised concerns about valuation, custody, record keeping, and regulatory compliance.
Fidelity is estimated to hold more than $2.4 trillion in 401(k) plan assets by 2020, accounting for roughly one-third of the market at that time. If the Labor Department accepts the companies’ goals despite widespread public skepticism, it could help the asset class go mainstream. Given the large number of 401(k) accounts in the United States (about $6.2 trillion), even a moderately successful offering could generate billions of dollars in revenue each year.
