The Floodgates Open

Fidelity is the largest provider of 401K plans in the United States, managing more than 1/3 of the market. As one of the first tradfi institutions to enter the digital asset space, they can now claim that title for offering bitcoin access in 401K accounts.

• Fidelity told the Wallstreet Journal and other publications that they would begin offering bitcoin in 401ks sometime this summer, thanks to growing interest.
• Plan sponsors must approve of any digital asset investment options for their enrollees on a company-by-company basis, with MicroStrategy already first in line.
• Fidelity currently proposes to allow plan members to allocate up to 20% of their portfolio to bitcoin but that number could change, and they intend to offer other digital assets as well.
• The Department of Labor is not in favor of this, recently issuing a compliance assistance document full of staunch warnings about crypto investments in 401k funds. Although they don’t ban crypto from 401Ks outright, they do suggest that cryptocurrencies do not yet meet that bar, adding that they would investigate plans that choose to offer crypto.
• According to Fidelity, the Department of Labor is substituting its opinion for what rightly belongs to plan sponsors. Fidelity also believes that its new digital asset account will address some of the Department’s concerns.

If Fidelity currently manages $4.2 trillion in assets, a 20% allocation to the digital asset space would be almost $1 trillion but that is not the only flood gate opening. The competition will drive other providers to offer their own clients access to crypto in their 401K as well. It may begin as a trickle but as pressure builds, the flood gates will open.