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Fidelity CEO Brings Crypto Some Solace

Abigail Johnson says when everyone else is getting out, 'that’s the time to double down and go extra hard into it.'
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Abigail Johnson has seen a few winters in her time.

Johnson, CEO of Fidelity Investments, shared her thoughts about the cryptocurrency market during a discussion at Consensus 2022 in Austin, Texas.

“I figure this is my third crypto winter. There’s been plenty of ups and downs but I see that as an opportunity,” Johnson said of the bear market, according to Coindesk, which produced the event.

'Double Down and Go Extra Hard'

“I was raised to be a contrarian thinker, and so I have this knee-jerk reaction: If you believe that the fundamentals of a long-term case are really strong, when everybody else is dipping [out], that’s the time to double down and go extra hard into it,” she continued.

Johnson acknowledged the recent cryptocurrency price drop, saying, "I feel awful about the value that is lost, but I also believe the industry in crypto has a lot more to come."

Analysts at Goldman Sachs recently said that the global market for major cryptocurrencies lost about $1 trillion in value this year.

In April, Fidelity Investments said it would allow investors to put a bitcoin account in their 401(k)s. The Boston-based investment brokerage became involved with bitcoin in 2014. 

'A Seat at the Table'

“I really wanted to do mining because I wanted us to understand the whole ecosystem, I wanted us to have a seat at the table with people who were really driving things and understand the full stack,” Johnson said.

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.

There have been some concerns about Fidelity's digital assets account.

Ali Khawar, the acting assistant secretary of the Employee Benefits Security Administration, told the Wall Street Journal in April that the department has “grave concerns” about Fidelity’s move to include the option of investing in bitcoin within its 401(k) savings program.

In addition, Massachusetts Sen. Elizabeth Warren and Minnesota Sen. Tina Smith wrote to Johnson expressing concern about the plan and noting that the U.S. Department of Labor had warned 401(k) plan fiduciaries to exercise “extreme care” before adding a cryptocurrency option to their investment menu due to the high levels of risk posed by digital assets.

'Pounding the Crypto Drum'

Earlier this month, ForUsAll Inc., a 401(k) provider, sued the Labor Department, claiming regulators breached their statutory purview by threatening “an investigative program” aimed at plan sponsors that offer digital assets through their core plan lineup or self-directed brokerage accounts.

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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.

Frank Corva, senior analyst for crypto and blockchain at Finder, said Johnson's comments about doubling down are "surely significant - and it’s also nothing new."

"Johnson has been pounding the crypto drum for years now," he said. "And beyond Johnson’s rhetoric, Johnson has helped Fidelity to blaze a path for traditional financial institutions and retail investors to enter the digital asset space for years now."

"Over the past eight years, he said, "Fidelity has paved a path that only recently has other traditional financial institutions begun to follow."

In 2019, the company obtained the hard-to-acquire New York State BitLicense, he said, a business license of virtual currency activities, issued by the New York State Department of Financial Services

Fidelity has been far ahead of the curve as compared with other major traditional financial firms, Corva said.

"Johnson and her team know how to not only buy the dip and hold with conviction for the long term, but they know how to build when the crypto market is down, as they did in 2018-2019," he added.

Setting the Standard

Corva said it is hard to imagine that the likes of JPMorgan Chase CEO Jamie Dimon and other major banking CEOs, aren’t paying attention to Johnson’s rhetoric and Fidelity’s actions.

"I’d imagine that what Johnson and Fidelity have done in the crypto space has been one of the factors that’s made Dimon warm up to Bitcoin," he said. "The more Johnson sets the standard for what a traditional finance institution like Fidelity can do to bring its clients - both retail and institutional - into the digital asset space, the more the crypto sector will likely benefit."

In February, the BNY Mellon bank, which specializes in storing assets for corporate clients, said it would custody cryptocurrencies for the first time. Fidelity started offering its bitcoin storage services in March 2019. 

Separately, Citadel Securities and Virtu Financial are building a cryptocurrency trading platform with help from Fidelity and Charles Schwab  (SCHW) - Get Charles Schwab Corporation (The) Report.

The crypto product is still in its early development, Bloomberg reported, citing people familiar with the matter, adding that it could be available late this year or early next year.