“For the average American, the need for retirement savings in their old age is significant,” an official said.
Fidelity’s plan to offer 401(k) savers an option to invest in bitcoin is concerning, a Labor Department official said.
There’s a lot of hype around “you have to get in now because you will be left behind otherwise,” Ali Khawar told the WSJ.
Bitcoin is often volatile and has shed 40% of its value since its November 2021 high of $69,000.
The US Labor Department is worried that Fidelity’s plan to allow 401(k) customers to invest in bitcoin is risky for the retirement savers.
The agency has “grave concerns” about the move, Ali Khawar, one of its officials, told the Wall Street Journal.
Khawar, who is acting assistant secretary of the Employee Benefits Security Administration, said in the report Thursday that he regards cryptocurrencies as speculative. He said crypto is surrounded by hype urging people to invest, with the message “You have to get in now, because you will be left behind otherwise.”
Fidelity, which manages $2.7 trillion in assets for 20 million clients, said Tuesday it will open its 401(k) plans to bitcoin by the middle of this year. It’s the first major retirement-plan provider to do this.
It will let customers put up to 20% of their savings into bitcoin. Other cryptocurrencies will likely be added in the future.
The Labor Department regulates 401(k) plans sponsored by companies, and Khawar cautioned in a March blog post that providers should use “extreme care” before adding cryptocurrencies to their plans.
Meanwhile, the Justice Department has warned that the volatile swings in crypto prices mean the digital assets are too risky for retirement savers.
Bitcoin has fallen 40% since hitting a record high of about $69,000 in November, and crypto assets have lost ground across the board in 2022 so far.
Khawar said he was notified by Fidelity just one day before the provider revealed it would open up the bitcoin option to the 23,000 companies that use its service.
“For the average American, the need for retirement savings in their old age is significant,” he said. “We are not talking about millionaires and billionaires that have a ton of other assets to draw down.”
In March, the Labor Department issued guidance to companies marketing investments in cryptocurrencies to 401(k) plans.
It said its Employee Benefits Security Administration plans to question companies offering crypto retirement “about how they can square their actions …read more
Source:: Business Insider