Bitcoin’s crashing. The Biden administration wants to keep it out of your 401(k).

“The atmospheric conditions – the YOLO and the FOMO of cryptocurrency – are our concerns,” Labor Department Deputy Secretary Ali Khawar said in an interview. “At this point, you don’t know whether you’re betting on the winning horse or not. It is very speculative.”

Fidelity — one of the most prominent old-fashioned financial giants embracing digital currency trading — is pushing ahead with the initiative as officials in Washington scramble to keep pace with the highly volatile $1.3 trillion crypto market. The company’s decision shows Wall Street stalwarts beginning to lend their lobbying power to the crypto industry’s struggle to shape the policies just being written as virtual currencies become mainstream.

With 23,000 companies using Fidelity for their employees’ retirement, AARP and consumer advocates are also sounding the alarm that throwing crypto into 401(k)s could leave employers and employees with the bag. The Labor Department warns that companies that put crypto on their retirement plan menus could be under investigation for not acting in the best interests of their employees.

“It’s very hard to separate the facts from the hype — and there’s a lot of hype,” said Micah Hauptman, director of investor protection at the Consumer Federation of America. “Offering these assets to include sponsors in their lineups could increase their liability, and that’s not good for anyone. It’s not good for small businesses…it’s not good for their employees.”

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

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

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

Plan fiduciaries – usually employers – are held to particularly high standards of caution when it comes to choosing the investment options available to their employees. Some investments, such as collectibles and certain precious metals, are prohibited. While DOL has stopped throwing crypto on a no-fly list, it has “serious concerns about the prudence” of investing in digital assets. That means the employer could be liable if an employee’s 401(k) Bitcoin holdings go bankrupt.

Notably, Bitcoin is not yet planned as an option in 401(k)s where Fidelity acts as a fiduciary, said Fidelity spokesman Eric Sandwen.

In an April 12 reply letter, Dave Gray, head of Fidelity’s Workplace Products and Platforms division, urged the Labor Department to withdraw or revise its guidelines to say it is not imprudent to include crypto in 401(k). )s.

Fidelity’s Bitcoin 401(k) offering, to be launched later this year, leaves the decision-making to individual employees who choose the program through their employer.

The Labor Department issued warnings in part due to the lack of clarity about how digital assets will be regulated and concerns about scams, market manipulation and other fraud, Khawar said. There are no clear benchmarks for associating valuations with digital assets, nor are there any rules about how plan managers maintain the custody of a retiree’s crypto holdings.

“We don’t know what regulatory changes are going to happen in this market and who will adapt better or worse,” he said. “Even if you’re a big believer in cryptocurrency, I don’t think anyone has any assurance that Bitcoin itself will be the currency that succeeds in ways others don’t.”

There are also questions about how Bitcoin or other digital assets would fit into the context of typical 401(k) investment portfolios, which are built to give retirees a reliable stream of income as they withdraw their savings. AARP, the advocacy group for Americans over 50, argues that crypto’s recent catastrophic downturn is proof that digital currencies are too dangerous for retirement planning.

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

Fidelity’s decision to move on resulted in a quick rebuke from Warren and Sen. Tina Smith (D-Minn.), who in a May 4 letter to Fidelity CEO Abigail Johnson, asked why the company had not heeded the Labor Department’s warning. The senators cited extreme price volatility, which they say is exacerbated by influences such as Tesla CEO Elon Musk. They also asked about potential conflicts of interest related to Fidelity’s foray into Bitcoin mining.

“In short, investing in cryptocurrencies is a risky and speculative gamble, and we are concerned that Fidelity would take these risks with millions of Americans in retirement savings,” they said.

The day after Warren and Smith called the company, Tuberville introduced the “Financial Freedom Act” that would prohibit the Labor Department from limiting the types of investments allowed in self-directed 401(k) accounts. While Tuberville spokesman Ryann DuRant said the senator’s staff met with Fidelity and crypto trading groups before the bill’s publication, she said Fidelity had no role in drafting legislative language.

Traditional financial trading groups, including the American Bankers Association and the Securities Industry and Financial Markets Association, have sent letters to DOL questioning the guidelines and also demanding revisions.

“The government has nothing to do with getting in the way of retirement savers wanting to make their own investment choices,” Tuberville said in a statement. “Once you’ve earned your salary, you have to decide how you invest your money. My legislation ensures that is the case.”

Sandwen said the company has put in place several consumer safeguards, including “excessive trade oversight, transparency, education and cybersecurity features”.

“Fidelity looks forward to continuing the dialogue about this exciting offering with federal regulators and policymakers in line with our approach to many new services we offer to our customers,” said Sandwen.

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