Opinion: Fidelity’s Bitcoin Movement Gets All The Bad Publicity

The late Fidelity Investments big boss built the family’s Boston-based fund management company into one of the world’s largest over a long career.

Johnson died on March 23 this year, aged 91.

On April 26, just over a month later, his daughter and heiress, Fidelity chief executive Abby Johnson, unveiled controversial plans to include bitcoin in the 401(k) platform she manages on behalf of thousands of American companies.

Chance ? Most likely. Bitcoin had surely been in the works for months. And Fidelity had dipped its toe in the bitcoin pool long before.

But it raises the intriguing question of what Ned would have thought of this latest decision. The former Boston Yankee and Brahmin had a reputation as a conservative steward of client assets. He was also jealous of Fidelity’s corporate reputation. And the Bitcoin movement has generated publicity for all the wrong reasons. That includes getting into public scrapes with senators and the Department of Labor. And associates the company with an asset tanking down a third since the announcement.

Senator Dick Durbin of Illinois has now joined colleagues Tina Smith (Minnesota) and Elizabeth Warren of Fidelity’s home state of Massachusetts in publicly chastising the fund giant over bitcoin.

Denouncing cryptocurrency as a “volatile, illiquid and speculative asset” and a “casino”, three senators want to know why Fidelity, “a trusted name in the retirement industry” and “one of the leading names in the world “Finance” would consider it in 401(k) plans.

In fact, the letter from the three senators criticizes not just Fidelity, but just about everyone involved in the rise of these cryptocurrencies over the past two years. This includes “social media investment experts, highly paid actors and celebrities, and even some Washington programmed” who made cryptocurrency respectable to the public and recovered to drive bitcoin to around 60,000. dollars, they said.

“Some even went so far as to call bitcoin an ‘inflation hedge,’ which proved a useful investment tool in times of high inflation,” they added.

Yes indeed.

Senator Smith sent this statement to MarketWatch on Friday:

“I start with the core value that retirement security is extremely important. You only have to look at the Great Recession to see how volatile and risky retirement investments really hurt a lot of people. I think crypto is often misunderstood and has proven to be quite unpredictable, and could leave people investing a significant portion of their retirement dry. I think we need to think about whether financial institutions should allow people to retire on cryptocurrency in the absence of strong regulatory safeguards.

Fidelity replied:

“Fidelity continues to have a strong interest in digital assets and blockchain. We are proud of the Digital Asset Account as a responsible solution to respond to public interest requests. In fact, customer interest has not only been strong, but also spans a wide range of industries and company sizes. We are on track to launch our first plan sponsor clients this fall.

We continue our respectful dialogue with policy makers to responsibly provide access to all consumer protections in accordance and educational guidance for plan sponsors when considering offering this innovative service. In line with our ongoing dialogue with regulators and policy makers, we work directly with them.

Loyalty says it responds to customer interest. The company provides the platform and back office for the company’s 401(k) and pension plans. It currently serves 23,000 businesses and nearly 40 million plan members.

The company says bitcoin is the only cryptocurrency it plans to offer in its suite of offerings, and participants won’t be allowed to commit more than 20% of their funds to the digital currency. Plan sponsors aren’t required to include the bitcoin offering in their 401(k) and they can impose lower limits even if they do, Fidelity adds.

You can see this in two ways.

Personally, I am not a bitcoin fan. I’ve been asking someone, anyone, for years to tell me why we need it, and what I can do with it that I can’t do with anything else. I still haven’t had an answer. If it were the only digital currency in the world, it would have monopoly value. But coinmarketcap.com lists almost 10,000 competing digital coins and new ones are created all the time. Just because the underlying technology is smart doesn’t mean the coin is valuable. Sorry, I already saw this film in 1999-2000.

Don’t even get me started on NFTs.

Litigation attorney Mark Bokyo told a retirement industry conference this week that including bitcoin in 401(k) plans would be great news…for lawyers, when participants eventually persist. in justice.

On the other hand, there’s nothing stopping people from betting their 401(k) plans on all sorts of “volatile, illiquid, and speculative” assets, which include many stocks on the stock market. Many plan sponsors allow you to hold individual stocks in your plan as well as diversified funds.

And there’s also nothing stopping people from speculating on these digital coins with their hard-earned cash outside of their retirement accounts. As long as regulators let this speculative bubble burst and then collapse, people would find a way to lose money. Whether we want to encourage them to blow up their 401(k)s on this is another matter.

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