Fidelity Investment is now the first major retirement planner to allow investors to allocate a portion of their retirement savings to bitcoins through their 401(k)s.
The financial services provider says MicroStrategy Inc, a major bitcoin corporate backer, will be the first employer to incorporate the new product, which will later be made available to other employers by the middle of the year, Reuters reports.
Employees will be able to hold bitcoin through a Digital Assets Account (DAA) within their core investment options on their 401(k) plans, according to Fidelity.
The adoption of the Digital Assets Account has been made as a response to increased demand among investors. For example, Newfront, a retirement consulting services provider, has indicated that the DAA will address demand among their client base.
Fidelity also added that plan sponsors will be able to schedule employee contributions toward the DAA and allocate limits on exchanging such contributions to bitcoin, adding that further updates or adjustments on the new offering will be made available in the months ahead.
Dave Gray, head of workplace retirement offerings and platforms at Fidelity, states that the plan will initially only focus on the bitcoin cryptocurrency, but he anticipates other digital assets will eventually be made available.
“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,” Gray tells CNBC.
Nevertheless, regulators have cautioned against allowing cryptocurrencies into 401(k)s. The Department of Labor asked plan fiduciaries to “exercise extreme care” before adding cryptocurrencies to 401(k) investment menus for participants. Regulators are concerned about speculation and volatility as well as the high valuation, which can all contribute to undue risks with a retirement account. Furthermore, cryptocurrencies can come with major custodial and record-keeping issues since losing or forgetting a password can result in the loss of the asset forever.
For more news, information, and strategy, visit the Crypto Channel.