Fidelity Will Now Allow Bitcoin In 401(k) Accounts

By Kevin • April 26, 2022 7:08 pm • Comments

Major financial services provider Fidelity Investments has announced that they will now allow investors to put Bitcoin into their 401(k) accounts.

This marks a new milestone for digital assets as this allows people to gain exposure to the crypto markets without actually creating an account on a crypto exchange.

This means that this gives mainstream access to the crypto industry from a pool of capital that is typically reserved only for traditional financial assets.

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With that being said, the company says that there will be a maximum limit of 20% that can be allocated to the account in Bitcoin.

CoinDesk reports:

Fidelity’s retirement accounts are big business: They held an estimated $2.4 trillion in 401(k) assets in 2020, or more than a third of the market at the time, as per research firm Cerulli Associates. Fidelity CEO Abby Johnson is scheduled to speak at Consensus 2022 in June.

Fees on the bitcoin investments in Fidelity’s 401(k) accounts would range between 0.75% and 0.90% – depending on the amount and employer – and held on its own custody platform.

An additional trading fee would be levied, which remains undisclosed at writing time. Fidelity further plans to create educational materials for investors.

Business analytics firm MicroStrategy (MSTR) is said to have already signed on to the plan.

The firm holds billions of dollars in bitcoin and its founder, Michael Saylor, is a staunch backer – often tweeting outlandish takes about the asset.

Fidelity has also gotten involved with the crypto space in previous years, but this was the first time it was introduced to retirement accounts which indicates that there will be a massive increase of incoming capital into the crypto market.

Last year, the company had launched bitcoin trading and custody services for institutional investors in Canada, Switzerland, and Germany.

As many expected, the recent move from the company has also faced criticism from some government agencies including the US Labor Department which expressed concern about providers giving this new option.

The claim is that this would supposedly put potential investors at risk due to crypto’s volatile nature, but many believe that this claim is often used as a scapegoat reason to limit the growth of crypto.

NPR.org reports:

Proponents say cryptocurrencies can boost returns in a well diversified portfolio, without adding too much risk.

That’s because cryptocurrencies haven’t always moved in the same direction as stocks and other investments, though they often have in recent months amid worries about rising interest rates.

Some investors may believe in all those pros of bitcoin, but still prefer not having to open a new account to buy bitcoin, learn the intricacies of how to store them or deal with taxes on gains made in the years running up to retirement.

Or they may come around to that belief soon, and Fidelity wanted to be ready for them, said Dave Gray, Fidelity Investments’ head of workplace retirement offerings and platforms.

“We have been developing this, anticipating some of the workforce trends that we see coming,” Gray said. “Our clients expect us to be ahead and developing innovative solutions.”

It is likely that Fidelity will not be the only one offering such services and that more digital assets may be added soon in addition to just Bitcoin.

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