Senator Elizabeth Warren of Massachusetts and fellow Democrat Senator Tina Smith of Minnesota have issued concerns around Fidelity's recently announced plan to allow customers to allocate Bitcoin to their 401(k) retirement savings accounts.
At the end of April, Fidelity announced the launch of its Digital Assets Account, a new proprietary offering that enables companies—if they choose—to add Bitcoin to their customers’ retirement saving accounts.
In a Wednesday letter obtained by The Wall Street Journal, Warren and Smith pointed to the volatile nature of Bitcoin, as well as asked how Fidelity was going to deal with “significant risks such as fraud, theft, and loss" posed by the leading cryptocurrency.
“Investing in cryptocurrencies is a risky and speculative gamble, and we are concerned that Fidelity would take these risks with millions of Americans’ retirement savings,” reads the letter.
Warren and Smith are members of Senate committees that, among others, oversee retirement-related matters. Warren is a member of the Special Committee on Aging, while Smith serves on the Senate Committee on Health, Education, Labor, and Pensions.
Furthermore, the two lawmakers stated that “Bitcoin’s volatility is compounded by its susceptibility to the whims of just a handful of influencers,” specifically mentioning Tesla CEO Elon Musk, whose “tweets alone have led to Bitcoin value fluctuations as high as 8%.”
Warren and Smith demand answers
Besides raising concerns about using retirement accounts to invest in crypto, the two senators have also asked Fidelity several specific questions about their recent initiative.
First, they asked Fidelity why the firm disregarded the Department of Labor’s (DOL) concerns.
The investment firm’s crypto announcement followed a March press release from the DOL, in which the agency asked fiduciaries to “exercise extreme care” before adding cryptocurrencies as an investment option to a 401(k) plan.
Other questions revolve around the fee structure for customers if they decide to invest in Bitcoin and how much the firm has earned since it began its crypto mining operations.
The firm first revealed it was experimenting with Bitcoin and Ethereum mining in 2017 before launching a digital asset custody and trading platform in 2018.
Warren and Smith also asked Fidelity CEO Abigail Johnson about a potential conflict of interest, pointing out that the Boston-based firm “is both a Bitcoin miner and a purveyor of Bitcoin."
In a statement to the media on May 5, Fidelity replied to the lawmakers, describing itself "as a Massachusetts-based company with a proven 75-plus-year history of doing what's in the best interest of our customers.”
“We look forward to continuing our respectful dialogue with policymakers to responsibly provide access with all appropriate consumer protections and educational guidance for plan sponsors as they consider offering this innovative product. Consistent with our ongoing dialogue with regulators and policymakers, we will respond directly," said the firm.
Fidelity is expected to respond to these specific questions raised in the letter by May 18, 2022.