Want to spice up your 401(k)? Fidelity is going crypto. The major financial services provider launched Digital Asset Accounts on Tuesday, allowing account holders to have a portion of their retirement savings allocated to bitcoin. It's starting by offering the accounts to employees of MicroStrategy, a software company that has placed bets on cryptocurrency.
Though Fidelity isn't the first firm to offer crypto retirement accounts, the company appears to be the biggest to wade in. Besides MicroStrategy, the option will be broadly available for employers to add to its 401(k) plans by the middle of this year, Fidelity said in its announcement. Prior to this, Fidelity had only offered cryptocurrency accounts to institutional and accredited investors. Currently, the plans will only invest in bitcoin, not other cryptocurrencies. MicroStrategy CEO Michael Saylor is an outspoken bitcoin advocate.
“There is growing interest from plan sponsors for vehicles that enable them to provide their employees access to digital assets in defined contribution plans, and in turn from individuals with an appetite to incorporate cryptocurrencies into their long-term investment strategies," Dave Gray, Fidelity's head of workplace retirement offerings and platforms, said in a statement.
The move to offer crypto-enabled 401(k) plans is the first of its kind by a major firm. Fidelity is taking on a big regulatory risk along with its pioneering status.
The Department of Labor released guidance in March on putting cryptocurrencies in retirement accounts, strongly advising caution. The department warned companies considering this option of cryptocurrencies' "extreme price volatility" and "significant risks of fraud, theft, and loss." Some of the department's other concerns include lack of investment knowledge from plan participants, record-keeping concerns, and the accuracy of the valuation of cryptocurrency. The Department of Labor oversees workplace retirement plans under the Employee Retirement Income Security Act of 1974, which puts it alongside a host of federal agencies looking to stake a claim to crypto oversight.
"The Department cautions plan fiduciaries to exercise extreme care before they consider adding a cryptocurrency option to a 401(k) plan's investment menu for plan participants," the agency wrote. It warned that it soon planned to investigate firms that offered cryptocurrencies.
Fidelity has other exposure to crypto through an institutional custody business, Fidelity Digital Assets. It began experimenting with cryptocurrencies in 2014 and started testing products with its own employees in 2016.
As Fidelity plunges into the digital asset world, other major firms seem more hesitant. Sébastien Page of T. Rowe Price said in August that the mandates it manages for its clients "do not currently appear well suited for investing in cryptocurrencies, especially given the extraordinary level of speculation and volatility in many crypto markets," though the firm will continue to research it. Vanguard said it also doesn't offer cryptocurrencies as an investment option, but acknowledges the "impact they’re making in the investing world."
"As cryptocurrencies and blockchain become increasingly mainstream, we’ll continue to monitor their development and discern the best path forward for our investors," Vanguard wrote in a piece of advice for investors in September.