Labor Dept Has ‘Grave Concerns’ About Fidelity Bitcoin Plan

Officials at the U.S. Department of Labor are warning that a plan by Fidelity Investments that lets investors put bitcoin into their 401(k) plans puts retirement accounts at risk.

“We have grave concerns with what Fidelity has done,” Ali Khawar, acting assistant secretary of the Employee Benefits Security Administration, said in a Wall Street Journal interview published Thursday (April 28).

See also: Labor Department Urges Caution on Crypto Retirement Plans

Khawar is part of a Labor Department group charged with regulating employer-sponsored retirement plans, and told the Journal he sees cryptocurrencies like bitcoin as speculative.

He said he believes there is “a lot of hype around ‘You have to get in now because you will be left behind otherwise.’”

Fidelity announced earlier this week that it will give employers the option to let 401(k) participants to invest up to 20% of their retirement savings in bitcoin.

Fidelity was the first large financial firm to embrace crypto, debuting its trading and custody platform Fidelity Digital Assets in 2018. And in 2021, it also rolled out two bitcoin exchange traded funds (ETFs) in Canada.

Learn more: Fidelity Tests Waters for Bitcoin Holdings in 401(K) Plans

Khawar said he learned of the move the day before it was announced and told the Journal it could threaten the retirements of ordinary Americans.

Noting that for most Americans, “the need for retirement savings in their old age is significant,” he told the Journal, “We are not talking about millionaires and billionaires that have a ton of other assets to draw down.”

His comments echoed earlier warnings issued by the department on this issue last month. The department has said its Employee Benefits Security Administration wants to investigate plans offering crypto investments, and the people managing these investments “should expect to be questioned about how they can square their actions with their duties of prudence and loyalty in light of the risks.”

In response to the Labor Department’s comments, Fidelity said its bitcoin plan “represents the firm’s continued commitment to evolving and broadening its digital assets offerings amidst steadily growing demand for digital assets across investor segments, and we believe that this technology and digital assets will represent a large part of the financial industry’s future.”