US-based retirement plan provider Fidelity must address risks and potential conflicts of interest related to its plan to allow Bitcoin investment in 401 (k) retirement accounts, according to Senators Elizabeth Warren of Massachusetts and Tina Smith of Minnesota, who have asked for answers from the financial services heavyweight before May 18. Fidelity announced last week that it would allow people to devote as much as 20 percent of their retirement plan to Bitcoin towards the end of the year.
Massachusetts Senator Elizabeth Warren and Minnesota Senator Tina Smith sent a letter to Fidelity's Chief Executive Officer, Abigail Johnson, earlier this week asking, among other things, why it didn't heed earlier concerns by the Department of Labor on the issue of including cryptocurrencies in 401(k) retirement accounts.
"Why did Fidelity ignore DOL's 'serious concerns regarding the prudence of a fiduciary's decision to expose 401(k) plan's participants to direct investments in cryptocurrencies?" the senators wrote.
Fidelity's push to extend the investment into 401(k) was said to be based on a growing demand from employees. Despite the firm clarifying that it will charge no fees for the service, the Senators still demanded to know if the proposed customers would need to worry about any fees at all.
In the prior announcement, Fidelity said it would only permit about 20% of a particular client's portfolio to be invested in digital currencies, however, the claim of popular demand has mainly been faulted by the Senators who wrote, "Despite a lack of demand for this option — only 2 percent of employers expressed interest in adding cryptocurrency to their 401(k) menu – Fidelity has decided to move full speed ahead with supporting Bitcoin investments."
Fidelity did not respond to the specific issues raised by the senators. But, in an email to CNN Business, a spokesman said that the company would respond directly to them.
"As a Massachusetts-based company with a proven 75-plus-year history of doing what's in the best interest of our customers, we look forward to continuing our respectful dialogue with policymakers to responsibly provide access with all appropriate consumer protections and educational guidance for plan sponsors as they consider offering this innovative product," Fidelity wrote.