Fidelity asked to reconsider its Bitcoin 401(k) product by US Senators

Lavina Daryanani
Source: TechStory

Richard Durbin, Elizabeth Warren, and Tina Smith recently wrote to Fidelity Investments to reconsider offering its Bitcoin-linked retirement product. The three US senators’ letter addressed to CEO Abigail Johnson noted that the industry was full of “charismatic wunderkinds, opportunistic fraudsters, and self-proclaimed investment advisors” promoting financial products with “little to no transparency.”

FTX Rained on Fidelity’s Parade

The senators felt that “the ill-advised, deceptive, and potentially illegal actions” would bear a “direct impact” on the valuation of Bitcoin. Chalking out how the “implosion of FTX” unveiled the “serious problems” faced by the industry, the senators wrote,

… we strongly urge Fidelity Investments to reconsider its decision to allow 401(k) plan sponsors to expose plan participants to Bitcoin. Since our previous letter, 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.

Also Read: Fidelity to Allow Bitcoin in Retirement Savings, in their 401(K) Accounts

Bitcoin would expose retirement savings to “unnecessary risk”: Senators

This is not the first instance where the senators have written to Fidelity. They previously sent a letter towards the end of July asking why Fidelity decided to expose its customers to a Bitcoin 401(k) product in the first place.

Around that time, one Bitcoin was valued at $21,239. Now, however, it’s priced around its multi-year low levels. While the full extent of the damage caused by FTX still unfolding, the senators highlighted that the contagion is being felt across the broader digital asset market, with Bitcoin being no exception. Thus, they opined,

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.

FTX’s collapse, as such, has hindered the growth and expansion path of others in the space. Companies having exposure to it have faced repercussions. The likes of Sequoia Capital and Temasek, for instance, have completely written down their FTX investments. Others like Genesis are in even greater trouble owing to the collapse.

In fact, per the latest revelations, FTX and its affiliates had a total cash balance of $1.24 billion. Despite that, they succumbed to bankruptcy. Evidently, there’s fear looming and the crypto space is under regulators’ radar. As a result, to put a cap on the after-effects, precautionary steps are being taken.