Last month, Fidelity announced that it would begin allowing customers to include Bitcoin in their 401(k) retirement accounts. However, as with most things crypto-related, US Senator Elizabeth Warren is highly skeptical of the idea.
The senator issued a letter to Fidelity CEO Abigail Johnson on Wednesday, questioning the “appropriateness” of her company’s decision. Warren claimed that cryptocurrencies pose risks of “fraud, theft and loss,” citing the Department of Labor’s warning to 401(k) fiduciaries.
The labor department’s warning was related to the volatility and speculation surrounding cryptocurrency markets. It also warned against investor naivete within the space, record-keeping concerns, and their “evolving regulatory environment”.
“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,” wrote Warren, alongside fellow Democrat Tina Smith.
Bitcoin’s short-term volatility is undeniable: the coin has seen multiple 50% drops within a single day throughout its history. As of today, the coin is down about 50% from its all-time high, which it reached as recently as November.
Fidelity has historically held an optimistic perspective on the asset in spite of this. The $4 trillion asset manager released a report in February arguing that Bitcoin was a superior monetary good to all other cryptos. In contrast to Warren’s perspective, it highlighted Bitcoin’s “security”, likening it to a hyper transportable “digital gold”.
Nevertheless, while hedge fund managers continue comparing the assets on a fundamental level, they bear little correlation in the markets. In fact, Bitcoin tends to trade far more closely with the NASDAQ than with gold. This may indicate its continued perception as a high-risk tech stock.
Senator Warren also calls out the intense wealth concentration of Bitcoin, in which 1000 holders possess 15% of its supply. In conclusion, the senators ask Fidelity how they will address BItcoin’s volatility risks, and what fees customers will incur by investing in it.
Washington’s Great Crypto Skeptic
Senator Warren was responsible for drafting the cryptocurrency sanctions bill in March, which could theoretically lead to trade restrictions against nearly all crypto developers. It was intended as a countermeasure against Russia’s use of cryptocurrency for sanctions evasion, but CoinCentre determined it “unconstitutional”.
In February, Senator Ted Cruz called out Liz Warren’s hatred for Bitcoin, deeming it “authoritarian”.