Fidelity Investments Inc.'s decision to launch a 401(k) cryptocurrency product is beyond the scope of the U.S. Labor Department’s regulatory warning on such investments, but the giant money manager is firing its own shot across the agency’s bow that crypto belongs in retirement savings plans.
The multinational financial services firm seemingly snubbed guidance the Labor Department issued in March announcing an “investigative program” aimed at companies that offer crypto products.
But the company won’t be in the department’s crosshairs because the DOL’s regulatory authority extends only as far as fiduciaries that exercise direct control over U.S. retirement plans, not service providers like Fidelity that market products to them.
That leaves employer sponsors caught in a tough spot between one of the nation’s largest 401(k) recordkeeping platforms and a regulator cracking down on digital assets, despite workplace investors hungry for cryptocurrency exposure.
“The DOL should withdraw the guidance, take a step back and work with the industry to issue guidance that is actually helpful,” said Dave Gray, Fidelity’s head of workplace retirement offerings and platforms. “Digital assets are becoming increasingly mainstream, and we should lead and anticipate the needs of employers.”
Fidelity says it’s responding to customer demand by offering a product that allows workers to allocate a portion of their retirement savings into bitcoin. The department’s guidance is misguided, Gray said.
“Money managers such as Fidelity can ignore this, because they do not believe themselves to be fiduciaries subject to fiduciary requirements,” said Jorge Leon, a partner at Michael Best & Friedrich LLP in Chicago. “They provide the platforms and leave the decision on the options to offer under the platforms up to the plan sponsors and administrators.”
The agency’s employee benefits regulator isn’t backing down, though. Agency officials told Bloomberg Law they aren’t planning to revoke the guidance, and that they are especially concerned about companies actively promoting cryptocurrency products.
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