The biggest game in town is giving crypto a seat at the table.
Fidelity Investments said it will allow investors to put a bitcoin account in their 401(k)s.
The Industry's First Offering
The company said Fidelity's workplace Digital Assets Account is the industry’s first offering that will enable people to have a portion of their retirement savings allocated to bitcoin through its core 401(k) plan investment lineup.
The account fee will be between 0.75% and 0.90% of assets, depending upon a number of factors including the employer and the amount invested.
Fidelity held $2.4 trillion in 401(k) assets in 2020, or more than a third of the market, according to the research firm Cerulli Associates.
There were about 600,000 401(k) plans in 2020, with about 60 million active participants and millions of former employees and retirees, Investment Company Investment said.
An additional trading fee, not yet disclosed, will be “competitively priced,” the firm said.
MicroStrategy, the business intelligence company founded by billionaire and bitcoin evangelist Michael Saylor, plans to be the first employer to offer Fidelity's digital assets account in their retirement plan.
'A Very Bold Statement'
Saylor said in a follow-up tweet that "as @MicroStrategy continues to be a pioneer in bitcoin for corporations, we are planning to offer our employees the option to invest in #bitcoin as part of their 401K portfolio. $MSTR"
"Congratulations on securing a safe and stable pension for your employees," one person responded.
"Looks like this is the start of a mass adoption!" another person commented.
"That Fidelity is permitting the more than 23,000 companies registered to its 401(k) program to include a bitcoin account option for their employees is a very bold statement that will help establish the growing acclaim of digital currency investments," said Egor Volotkovich, executive director of EVODeFi.
Volotkovich said that while Fidelity itself has had a good stint in terms of crypto investments over the years, "bringing it close to the average worker is very positive news for the crypto industry as this move can notably usher in tons of new retail investors into the bitcoin world."
"With Fidelity putting its foot forward in this regard, it is likely that other 401(k) service providers will be making a related move as the bitcoin support can give Fidelity a very massive competitive advantage that many will also seek to take advantage of," he said.
Laura Adams, MBA, a personal finance and cryptocurrency expert with Finder.com, said that while existing platforms allow individuals and the self-employed to invest in cryptocurrency inside various IRAs, "Fidelity leads the way for bitcoin getting added to employer-sponsored retirement plans."
"That’s significant because they’re one of the most well-known investment firms, and we’re likely to see a big uptick in workers adding to their 401(k)s later this year," she said. "Having more choices on your investment menu at work is good news for consumers who want to own a diversified retirement portfolio inside a tax-advantaged account."
More Investment Firms May Follow
If Fidelity’s bitcoin offering is popular with retirement plan participants, Adams said more investment firms may add it and alt-coins, such as ethereum and solana, to their menus.
"While employers may limit the amount of crypto that can be purchased by eligible employees, it’s an excellent way for American workers to gain exposure to bitcoin, build wealth, and reduce taxes," Adams said.
Bitcoin has experienced some dramatic movement in the last several months, hitting a high of $69,000 in November, to falling below $34,000 in January.
Last month, the U.S. Department of Labor issued a compliance resistance release that advised "plan fiduciaries to exercise extreme care before they consider adding a cryptocurrency option to a 401(k) plan's investment menu for plan participants."
"Extreme volatility can have a devastating impact on participants, especially those approaching retirement and those with substantial allocations to cryptocurrency."
Fidelity said its 2021 study found that 30% of U.S. institutional investors surveyed would prefer to buy an investment product containing digital assets.
In addition, the firm estimates that roughly 80 million U.S. individual investors currently own or have invested in digital currencies.
Fidelity began its exploration of blockchain technology in 2014 with bitcoin mining and in 2018 launched its first commercial offering, Fidelity Digital Assets, a platform that offers custody and trade execution for digital assets institutional investors.
In 2020, Fidelity’s digital asset management business launched a private bitcoin fund that is currently available to accredited investors.