Democratic senators Richard Durbin, Elizabeth Warren, and Tina Smith penned a letter to “strongly urge” the company’s CEO Abigail Johnson to reconsider a decision to allow 401(k) plan sponsors to expose participants to bitcoin.
401(k) plans are employer-sponsored defined-contribution pension accounts, and Fidelity Investments is the United States’ biggest provider of these pension plans.
The trio argued that, since their previous letter, sent in July this year,
“The digital asset industry has only grown more volatile, tumultuous, and chaotic—all features of an asset class no plan sponsor or person saving for retirement should want to go anywhere near.”
The senators used the fall of the crypto exchange FTX as an event that they said cannot be ignored and that made it “abundantly clear” that this industry has “serious problems.”
The contagion is still spreading and is being felt across the industry, and while the full extent of the damage caused by FTX is unknown, it’s clear that it is affecting BTC’s price, said the senators.
The letter stated that,
“The industry is full of charismatic wunderkinds, opportunistic fraudsters, and self-proclaimed investment advisors promoting financial products with little to no transparency. As a result, the ill-advised, deceptive, and potentially illegal actions of a few have a direct impact on the valuation of Bitcoin and other digital assets.”
Fidelity is responsible for more than 32 million Americans’ and 22,000 employers’ workplace retirement accounts and employer-sponsored plans, they added.
Therefore, concluded the letter’s authors,
“By many measures, we are already in a retirement security crisis, and it should not be made worse by exposing retirement savings to unnecessary risk. Any investment strategy based on catching lightning in a bottle, or motivated by the fear of missing out, is doomed to fail.”
As reported in April this year, Fidelity, which has $4.5 trillion in assets under management, said it would let participants choose to keep money in bitcoin – if their employers let them. The company explained that its “new proprietary offering” was called the Digital Assets Account, and for firms, could “provide your employees access to invest in digital assets, specifically bitcoin.”
Already at that time – before the massive Terra and FTX collapses, and subsequent contagions – regulators “said they’re skeptical of the idea,” as the New York Times suggested, noting that in March the US Department of Labor, which governs the space, “said it would cast a critical eye on plans that added digital assets to their investment menus.”
Soon after, Ali Khawar, acting assistant secretary of the Employee Benefits Security Administration at the Labor Department, said that they had “grave concerns with what Fidelity has done” as it “risks the retirement security of Americans.” He stated that the crypto has intriguing use cases, but that it needs “maturing” before people can put their retirement savings into it, adding that he and his colleagues had scheduled a conversation with Fidelity to discuss some of the concerns.
At 11 UTC on Tuesday morning, BTC was trading at $15,782. It was down 2% in a day and 5% in a week. Overall, it fell 18% in a month, 73% in a year, and 77% since its all-time high recorded in November last year.