US senators urge Fidelity to reconsider its Bitcoin offerings after FTX blow-up

The crypto-skeptic senators suggested the FTX collapse made it “abundantly clear” that the digital asset industry has "serious problems."

United States senators Elizabeth Warren, Tina Smith, and Richard Durbin have renewed their calls for Fidelity Investments to reconsider offering a Bitcoin (BTC)-linked 401(k) retirement product.

In a letter addressed to Fidelity Investments CEO Abigail Johnson on Nov. 21, the three senators said the recent fall of FTX is more reason than any for the $4.5 trillion asset management firm to reconsider its Bitcoin offering to retirement savers, stating:

“The recent implosion of FTX, a cryptocurrency exchange, has made it abundantly clear the digital asset industry has serious problems.”

The senators also added that “charismatic wunderkinds, opportunistic fraudsters, and self-proclaimed investment advisors” have played a huge role in manipulating the price of Bitcoin (BTC), which in turn has impacted 401(k) retirement savings holders who have invested in Fidelity’s Bitcoin product:

“Since July, when we last raised concerns with you about the deeply concerning prospect of exposing workplace retirement plans to Bitcoin, its value has plummeted."

“While the full extent of the damage caused by FTX continues to unfold, the contagion is being felt across the broader digital asset market. Bitcoin is no exception,” the senators commented.

The senators' letter to the Fidelity CEO was the second in recent months, with the first letter on Jul. 26 demanding an explanation of why Fidelity decided to expose its customers to a Bitcoin 401(k) product to begin with.

“Since our previous letter, the digital asset industry has only grown more volatile, tumultuous, and chaotic—all features of an asset class no plan sponsor or person saving for retirement should want to go anywhere near,” the senators wrote.

The implosion of FTX has made it clear that the digital asset industry has serious problems. I joined @SenWarren & @SenTinaSmith to urge Fidelity to do what is best & reconsider its decision to expose retirement accounts & employer-sponsored plans to these volatile assets. pic.twitter.com/qQn4PF80AP
— Senator Dick Durbin (@SenatorDurbin) November 21, 2022

Durbin, Smith and Warren also noted that some 32 million Americans and 22,000 U.S. employers use Fidelity as a workplace retirement account and employer-sponsored plan.

The senators added that with a retirement security crisis already playing out in the country, Fidelity shouldn’t be exposing its customer’s retirement savings to an “unnecessary risk.”

“In light of these risks and continuous warning signs, we again strongly urge Fidelity Investments to do what is best for plan sponsors and plan participants—seriously reconsider its decision to allow plan sponsors to offer Bitcoin exposure to plan participants.”

Cointelegraph reached out to Fidelity for their comment on the letter but did not receive an immediate response.

Meanwhile, not all U.S. lawmakers appear to have sided with the three crypto-skeptic senators in the past.

In May. 2022, Republican Senator Tommy Tuberville introduced the Financial Freedom Act into the U.S. Congress, which serves to allow U.S. residents to add cryptocurrency to their 401(k) retirement savings plan without being subject to regulatory influence.

Fidelity has continued to increase its investment in the digital asset space, with plans to expand its digital asset division by 25% with 100 new employees by the end of Q1 2023.

<div>Senator's Financial Freedom Act would ensure Bitcoin can be in your 401(k)</div>

Coin Telegraph

The bill is a response from the Alabama Senator to Senator Warren and the Department of Labor’s bid to block Bitcoin investments in self-directed 401(k) investment plans.

Republican Senator Tommy Tuberville from Alabama has unveiled a new bill he calls the Financial Freedom Act to allow Americans to add cryptocurrency to their 401(k) retirement savings plan unencumbered by regulatory guidance.

The new bill is Tuberville's response to the Department of Labor’s (DOL) push to potentially keep crypto out of 401(k) investment plans due to its perceived potential for risk to investors. As reported by Cointelegraph, the DOL said employees who choose to invest in crypto through their 401(k) could attract legal attention.

In an op-ed for CNBC on May 5, Senator Tuberville stated:

“The Federal Government has no business interfering with the ability of American workers to invest their 401(k) plan savings as they see fit.”

He said the DOL’s March 10 policy change against the use of brokerage windows by employees to self-direct their income investments is “inconsistent with longstanding practice.”

NEW BILL ALERT: I just introduced the #FinancialFreedomAct, allowing retirement savers to invest their 401(k) funds as they see fit.

The government should not be in the business of telling retirement savers how they can invest their money.https://t.co/6LGtpxquOW
— Coach Tommy Tuberville (@SenTuberville) May 5, 2022

Brokerage windows let 401(k) investors take control of what investments their account invests in rather than accepting what their employer’s broker chooses for them. The Senator continued:

“The agency’s new guidance ends this tradition of economic empowerment in favor of Big-Brother government control. Additionally, the Labor Department’s overreaching guidance seeks to place a massive new regulatory burden on 401(k) plan fiduciaries by requiring them to assess the suitability of investments offered through a brokerage window and to restrict investment options.”

Investment managing firm Fidelity Investments said on Apri. 26 it would begin allowing customers to include Bitcoin (BTC) in their 401(k) accounts. This caused Democratic Senators Elizabeth Warren and Tim Smith to argue in a letter to Fidelity CEO Abigail Johnson that there may be a conflict of interest since the firm has been working with crypto products since 2017. They also mentioned that crypto investments bear “significant risks of fraud, theft and loss.”

Senator Warren is a vocal opponent of crypto investments, referring to the industry last year as the “new shadow bank.”

While the DOL’s new guidance does not name Fidelity specifically, it notes that abuses of monetary law through cryptocurrency could lead to the shut down of trading platforms, which ultimately hurts investors.

Senator Tuberville promised that the Financial Freedom Act would prohibit the DOL from limiting what types of investments a self-directed 401(k) retirement plan can invest in. He stated succinctly at the end of his op-ed that, “The Labor Department should not be able to limit the range or type of investments retirement savers can select.”

“Whether or not you believe in the long-term economic prospects of cryptocurrency, the choice of what you invest your retirement savings in should be yours — not that of the government.”

So far, no other senators have yet voiced public support for the brand new bill. It would need to gain a majority of votes in the Senate to be passed along to the House of Representatives for further review. Democrats currently hold a majority in the Senate, which makes passage of the legislation a steep, uphill battle. However, Tuberville has made his point loud and clear.

Tommy Tuberville