Fidelity, the largest retirement plan provider in the United States, has today revealed intentions to allow consumers to invest in bitcoin through their 401(k) retirement accounts later this year.
Fidelity has recently launched a rather controversial technique into the mainstream, with 20 million plan members representing $2.7 trillion in assets.
It’s no surprise that Fidelity was the first commercial asset management business to carve out its domain in this space: Under CEO Abigail Johnson, the company has leaped ahead of its counterparts in creating digital asset solutions.
In 2018, it made its first crypto-related service, storing digital assets in escrow for institutional investors.
The announcement comes at a critical juncture in the rising effort to broaden access to alternative investments, a goal that may be viewed as either praiseworthy or hazardous, depending on who you ask.
Let’s start with the negatives, because concern regarding cryptocurrency expansion is fair given the asset class’s reputation for frauds and instability.
Furthermore, it may not be a viable investment; bitcoin has not shown to be an efficient inflation hedge and has lost more than 40% of its value since its high in November.
With that in mind, it’s simple to understand why authorities are opposed to allowing bitcoin access in retirement funds.
In a guidance issued last month, the US Department of Labor stated that fiduciaries should “exercise extreme caution” before doing so, noting cryptocurrencies’ historical volatility, potentially inflated price, and concerns about custody difficulties.
Given the near-impossibility of retrieving cryptocurrency from a wallet if a password is forgotten.
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