Will competitors follow Fidelity's lead on 401(k) Bitcoin offerings?

Will competitors follow Fidelity's lead on 401(k) Bitcoin offerings?

While Fidelity announced Tuesday that it will allow people to convert a portion of their retirement savings into Bitcoin through the company's 401(k) platform, rivals aren't as optimistic about the prospects.

The Boston-based financial services company reported growing interest from employers in offering crypto access to employees. However, rival 401(k) providers cite a lack of demand and the speculative nature of crypto as reasons for not following suit.

loyalty Digital Assets Account The offering is expected to be available to the approximately 23,000 employers who use Fidelity's platform by the middle of the year. It will allow employees to engage with Bitcoin, with a maximum allocation of 20%.

Competitors weigh in

Vanguard has no plans to offer a cryptocurrency option within 401(k) plans, a spokesperson told Blockworks.

The company, which has about 1,400 401(k) plan sponsors, has not commented on whether it might seek to follow Fidelity's move. Instead, the representative referred a blog post the company released in September, calling cryptocurrencies “highly speculative” and noting that their long-term investment case is “weak.”

“As many of our investors know, our investment philosophy encourages staying the course and blocking out the noise,” the blog says. “As cryptocurrencies and blockchain become more mainstream, we will continue to monitor their development and determine the best path forward for our investors.”

No company using Charles Schwab's 401(k) platform offers crypto investments, said a spokesman, who declined to comment on whether the company would consider launching a similar offering for Fidelity.

Schwab currently serves approximately 1,000 401(k) plans. About 60 percent of Schwab Retirement Plan Services customers offer a “brokerage window” in their 401(k) plan, allowing individuals to gain access to stocks, mutual funds, ETFs and over-the-counter trust products.

While some of these investment options offer exposure to crypto, assets in such products at Schwab amounted to less than 1% of total 401(k) window assets as of Dec. 31, the representative told Blockworks.

T. Rowe Price, which serves about 6,900 401(k) plans, has previously noted "the high level of speculation and lack of regulatory clarity" in the area. The mandates the firm manages for clients today are not well-suited to investing directly in digital assets, a spokesperson told Blockworks.

“None of the defined contribution plans we track offer cryptocurrency, and we have not seen customer demand for this type of investment,” the representative added.

It's just a matter of time?

But Bitstamp USA CEO Bobby Zagotta said Fidelity wouldn't make this move if there wasn't high demand for crypto.

Bitstamp's latest Crypto Pulse survey found that 80% of institutional investors believe crypto will overtake traditional investment vehicles within a decade.

“Other financial institutions must follow Fidelity’s lead or risk losing customers who increasingly view digital assets as an important part of their retirement planning,” Zagotta told Blockworks.

Nina Tannenbaum, head of business operations at Algorand, said Fidelity's move is a key indicator that digital currencies are increasingly being viewed beyond short-term speculative assets.

“It is also encouraging to see that Fidelity plans to expand its digital asset offerings beyond Bitcoin,” Tannenbaum said. “They could consider expanding their offering to include digital assets that are much more ESG and sustainable.”

Although Fidelity is the first major financial services company to offer crypto exposure within 401(k)s, ForUsAll last year unveiled an offering that allows employers to offer alternative investment options within such plans.

For all of us CEO Jeff Schulte said crypto access to 401(k)s is “inevitable” and noted that he expects other large institutions to follow Fidelity.

"Not all financial institutions and banks will jump in immediately; it will take time," he said. “But we believe that those who truly listen to their customers’ needs and understand the true investment case for crypto in a well-diversified portfolio will be the innovators and among the first to follow Fidelity’s lead.”

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The post Will Competitors Follow Fidelity's Lead on 401(k) Bitcoin Offering? is not financial advice.