Fidelity, pension plans in Bitcoin

Fidelity Investment, the world’s fourth-largest pension fund manager, stated on Tuesday that it will allow people to allocate part of their retirement savings in Bitcoin through their investment plans.

Fidelity Investment and retirement savings in Bitcoin 

Fidelity Investment adds the ability to deposit part of your retirement savings in Bitcoin

Fidelity Investment, the world’s fourth-largest investment fund with more than $28 trillion in assets under management and headquartered in Boston, Massachusetts, said it will allow its clients to include Bitcoin investments in their retirement plans. This is the first time an institutional fund has directly opened up the possibility of allocating its pension fund assets in Bitcoin.

Dave Gray, head of loyalty for pension plans, said:

“We started to hear a growing interest from plan sponsors, organically, as to how could Bitcoin or how could digital assets be offered in a retirement plan”.

The financial services firm also noted that the digital asset account will be widely available by the second half of 2022.

One of the first companies to enthusiastically join was Microstrategy, the world’s first Bitcoin investor, with 125,000 BTC in its portfolio, as communicated via Twitter by its CEO Michael Saylor.

MicroStrategy looks forward to working with @DigitalAssets to become the first public company to offer their employees the option to invest in bitcoin as part of our 401(k) program.https://t.co/Za33yj82Qv

— Michael Saylor (@saylor) April 26, 2022

Saylor later announced to CNBC:

“Bitcoin is a digital property and this makes it the perfect asset for a pension plan”.

How does the pension fund work? 

According to a leaked report by the New York Times on Tuesday, the investment in Bitcoin will be managed like a traditional mutual fund and employees will be able to decide to put a percentage of their retirement funds into Bitcoin.  

According to the NYT report, the percentage will be capped and the retirement account fee will be between 0.75% and 0.90% of the plan owner’s percentage of assets.

This move by Bitcoin represents a small revolution in terms of institutional investors being able to invest directly in digital assets, as the first spot ETF in Bitcoin has not yet been approved in the US, despite the SEC having received around 20 listing requests in recent months. 

One of these would be from Fidelity itself, which was rejected by the SEC last January. In response to this rejection by the US stock exchange authority, Fidelity launched a spot ETF on Bitcoin on the Frankfurt stock exchange in February.

On the other hand, Fidelity, a company that has long been very attentive to the world of cryptocurrencies, had already launched a spot ETF in Bitcoin in Canada, while it recently said it was ready to open up to investments in Ethereum as well. 

But the reaction from the US authorities to Fidelity’s decision to open up to investments in Bitcoin for its pension plans has been very cautious, if not critical.

The US Department of Labor said in a statement that:

“These investments present significant risks and challenges to participants’ retirement accounts, including significant risks of fraud, theft, and loss”.

The investment firm’s rebuttal to these claims came again through Dave Gray stating that:

“The Department of Labor is replacing its opinion on cryptocurrencies with what rightly belongs to the fiduciaries of plan sponsors”.

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