Democrats argue cryptocurrency might be too risky for 401(k)s
Sens. Elizabeth Warren (D-Mass.) and Tina Smith (D-Minn.) in a letter to American multinational financial services company Fidelity Investments Inc. argue that cryptocurrency is too risky an investment for retirement savers’ 401(k) plans.
In the letter sent to Fidelity CEO Abigail Johnson on Wednesday, the two lawmakers note their concerns over the company offering bitcoin as an option for its 401(k) investors and ask how Fidelity is managing conflicts of interest with its own cryptocurrency mining operation.
The letter also mentions bitcoin’s “volatile history,” pointing out that the cryptocurrency has recorded huge drops in value in the stock market and that Tesla CEO Elon Musk’s latest tweets have caused its value to fluctuate.
“Bitcoin’s volatility is compounded by its susceptibility to the whims of just a handful of influencers. Elon Musk’s tweets alone have led to Bitcoin value fluctuations as high as 8%,” the lawmakers write in their letter.
“The high concentration of Bitcoin ownership and mining exacerbates these volatility risks. One study estimates that just 10% of Bitcoin miners are responsible for processing 90% of Bitcoin transactions and that 1,000 individuals control 3 million Bitcoins — about 15% of the current Bitcoin supply.”
“In short, investing in cryptocurrencies is a risky and speculative gamble, and we are concerned that Fidelity would take these risks with millions of Americans’ retirement savings,” the letter said.
The lawmakers ask Johnson to provide answers to several questions contained in the letter, such as why the company ignored the Labor Department’s concerns about cryptocurrency in 401(k) plans and what risks bitcoin presents to their customers.
Fidelity announced last month that it will offer bitcoin investment to 401(k) holders, saying its new Digital Assets Account will allow investors to allocate the cryptocurrency into their retirement savings accounts.
Warren and Smith’s letter requests that Johnson provide them with answers to their question by May 18.
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