The major US asset manager Fidelity will offer workers the opportunity to have a portion of their retirement savings allocated to Bitcoin. The news could allow millions of Americans to invest directly in the cryptocurrency, in turn promoting its uptake.
Starting this summer, the US asset manager Fidelity wants to offer an option allowing savers to invest part of their retirement capital in the Bitcoin cryptocurrency. As such, savers will be able to allocate a certain percentage of their retirement plan contributions to a Bitcoin account. The upper limit will be determined by employers, bearing in mind that Fidelity will prohibit individuals from allocating more than 20% of a retirement fund to this highly volatile asset.
This initiative potentially concerns 80 million Americans who use Fidelity to manage their retirement funds, called 401(k) plans. This workplace savings plan is particularly popular in the United States, offering workers retirement funding with significant tax advantages. It is funded through payroll deductions. It is employers who propose which financial instruments the money can be invested in, such as stocks or bonds. The employee can then choose different options depending on the risks they are willing to take and the expected returns. These plans therefore do not guarantee a pre-determined amount, but depend entirely on the profits (or losses) made from the investments of an employee's capital.
Fidelity partners with more than 23,000 private companies in the United States. According to research firm Cerulli Associates, it held $2.4 trillion in assets in 2020 through its 401(k) plans -- the equivalent of one-third of the market. Now, this latest news could allow millions of people to be able to invest in Bitcoin -- all without even having to open an account on an exchange platform.
Towards greater confidence in crypto
For their part, US regulators have shown some skepticism about the idea. Last month, the Department of Labor warned against retirement plans willing to invest in cryptocurrency. Moreover, it reminded those overseeing these plans (i.e. employers) of their responsibility to offer "prudent" choices.
"There is growing interest from plan sponsors for vehicles that enable them to provide their employees access to digital assets in defined contribution plans, and in turn from individuals with an appetite to incorporate cryptocurrencies into their long-term investment strategies," said Dave Gray, Head of Workplace Retirement Offerings and Platforms at Fidelity Investments.
Apart from providing an opportunity for Fidelity to attract new customers with this unique offering, the initiative could also contribute to a more concrete and widespread adoption of cryptocurrencies. The evolution of the entire industry depends primarily on the adoption of crypto by popular institutions, thus creating a form of trust, to help reduce the volatility of digital assets.