According to reports, Labor Department officials worry Fidelity Investments’ plan to allow customers to store bitcoin in their 401(k) retirement savings accounts could jeopardise Americans’ financial security.
“We have grave concerns with what Fidelity has done” said Ali Khawar, acting assistant secretary of the Employee Benefits Security Administration.
It is with noting that Khawar’s group works inside the Labor Department to regulate business-sponsored retirement plans. In an interview, he shared that he views cryptocurrency as uncertain. There is “a lot of hype around. You have to get in now because you will be left behind otherwise” he said.
Khawar said he received a warning from Fidelity the day before it disclosed its plan to introduce bitcoin to the 23,000 companies that use its 401(k) services. Starting later this year, in its disclosure, Fidelity said that workers could allot as much as 20% of their savings to bitcoin. That limitation could be reduced by employers.
Khawar pointed out that for an average American, the need for retirement savings in their old age is significant.
His views resonate with the reservations of the federal government that was recently asked to examine the crypto space and find out if the Central Bank should take a dive into crypto space and develop their own Central Bank Digital Currency (CBDC).
Fidelity responded that its bitcoin offering demonstrates the firm’s persistent efforts to evolve and broaden its digital assets offerings as the demand for digital assets across investor segments is growing. The firm believes that digital assets and the underlying technology represents a large part of the financial industry’s future.
Khawar further explained that he and his colleagues will discuss some of the concerns with Fidelity. Among the department’s certain concerns was the 20% figure, as per a senior department official.
Another risk the Labor Department hinted at, is the uncertainty around crypto regulation.
Khawar said he believes cryptocurrency has interesting use cases. However, it needs “maturing” before people can put their retirement savings into it which includes the development of consumer protections.
Lastly, Khawar informed that the Labor Department isn’t banning cryptocurrency in 401(k)s. He added if employers think they can make a valid case for the asset and have addressed the department’s concerns, “that is their decision”.
