US senators criticized Fidelity’s proposal to invest retirement in bitcoin

Elizabeth Warren and Tina Smith sent a letter to the company in which they called investing in cryptocurrencies a “risky and speculative gamble”

06.05.2022 - 12:25

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What’s new? Democratic Senators Elizabeth Warren and Tina Smith have sent a letter to Fidelity Investments CEO Abigail Johnson, questioning the company’s proposal to invest clients’ retirement savings in bitcoin. The officials called investing in cryptocurrencies a “risky and speculative gamble.” Warren and Smith are concerned that Fidelity “would take these risks with millions of Americans’ retirement savings.”

Warren and Smith’s letter

What else did the officials write? Warren and Smith said Fidelity’s decision on bitcoin might have been influenced by “potential conflicts of interest”. They explained that the company had previously mined cryptocurrencies (BTC and ETH), integrated Coinbase accounts, and also opened its own bitcoin fund for wealthy clients. Senators also highlighted that the new service is not in high demand, with only 2% of employers expressing interest in adding cryptocurrencies to a 401(k) retirement savings account.

What is known about Fidelity? It is a US-based financial services holding company. Fidelity Investments was founded by Edward Johnson II in 1946. The company was one of the first financial institutions to get involved in cryptocurrencies. Fidelity launched its digital asset division in 2018.

What events happened before? On April 26, Fidelity Investments announced that it would allow 401(k) retirement savings account holders to invest directly in bitcoin. The new retirement investment plan in cryptocurrency would go into effect in late 2022. If approved by employers, retirees would be able to invest up to 20% of their savings in bitcoin. MicroStrategy agreed to participate in the new program.

On April 28, the US Department of Labor criticized Fidelity’s new service. The agency is concerned about the volatility of the first cryptocurrency. Officials noted that the average US citizen had a significant need for retirement savings. The agency believes that the Fidelity initiative “risks the retirement security of Americans.”

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