Fidelity Investment, one of the largest financial management companies in the United States with over $8.3 trillion of assets under administration [Q2 Highlights], will allow their investors to fund their 401(k) with Bitcoin [WSJ].
The crypto-investor population is growing, and many younger investors are experimenting with cryptocurrency. Fidelity’s announcement appears just days after the US Department of Labor cautioned against allowing cryptocurrencies to be invested in retirement plans [US Labor]; thus it is a very risky move by Fidelity.
Fidelity will be the first financial firm of its size to allow cryptocurrency in retirement accounts, which will force these accounts to come under heavy regulatory scrutiny. Still, to the bold go the riches, and this bold step could significantly boost their grasp on the market and secure future investors.
Currently, Bitcoin is the only cryptocurrency that will be available to investors, and Fidelity won’t enact its policy until later in 2022. Based on the demand for Bitcoin, Fidelity plans to expand to other cryptocurrencies as their plan progresses. Furthermore, investors will be limited to only investing 20% of their 401(k) assets into Bitcoin.
This is a game-changing event, though several competitors have declined to meet the challenge. For example, Vanguard Group has publicly said they will not allow crypt currencies at this time [WSJ]. Only time will tell whether this pays off for Fidelity.
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California has required employers to “indemnify” employees for “necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer” in substantially the same terms since 1937 under Labor Code § 2802.
