US Senators urge Fidelity to drop BTC amid FTX fallout
Three U.S. Senators urged Fidelity to reconsider its decision to offer Bitcoin exposure in its 401(k) plans, saying the FTX fallout revealed the volatile, tumultuous, and chaotic nature of the crypto industry.
Fidelity Investments, one of the largest asset managers and 401(k) providers in the world, received another concerned letter from U.S. lawmakers concerned about the FTX fallout.
Senators Elizabeth Warren of Massachusetts, Tina Smith of Minnesota, and Richard Durbin of Illinois all signed a letter urging Fidelity to reconsider its exposure to Bitcoin.
In April this year, Fidelity launched the Digital Asset Account, its latest offering providing companies the ability to add Bitcoin to their customers’ retirement savings. Under the scheme, retirement savers could add a maximum of 20% of their portfolio to BTC, with the employer able to reduce this cap if deemed necessary.
At the time, Senators Warren and Smith warned Fidelity about the risks associated with the crypto industry, highlighting Bitcoin’s volatility as their main concern.
The letter sent on Nov. 21, now with an additional signature from Senator Richard Durbin, reiterates the lawmakers’ concerns.
“Once again, 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.”
The Senators reminded Fidelity that more than 32 million Americans and 22,000 employers trust the company with their 401(k) plans and that expanding beyond the traditional financial market was risky.
“The industry is full of charismatic wunderkinds, opportunistic fraudsters, and self-proclaimed investment advisors promoting financial products with little to no transparency. As a result, the ill-advised, deceptive, and potentially illegal actions of a few have a direct impact on the valuation of Bitcoin and other digital assets.”
FTX’s collapse has wreaked havoc across the crypto market and has made it “abundantly clear” that the industry has serious problems. The implosion of the exchange can’t be ignored and the full extent of the damage it caused is yet to unfold, the letter said.
The Senators noted that the market was already in a retirement security crisis and exposing retirement savings to unnecessary risk could make it worse.
“In light of these risks and continuous warning signs, we again strongly urge Fidelity Investments to do what is best for plan sponsors and plan participants — seriously reconsider its decision to allow plan sponsors to offer Bitcoin exposure to plan participants. “
We are yet to see how the market fallout and lawmaker concern affects Fidelity’s plans to launch retail trading for BTC.
The company has provided its institutional clients with a full suite of Bitcoin trading and custody solutions since 2018, and announced plans to launch the same service to its retail clients in November. However, there has been no update on the plan with the month almost over.