U.S. Senator Elizabeth Warren and her Democratic colleague Tina Smith recently wrote to fidelity investment, asking the company to explain its plan to allow 401 (k) pension accounts to invest in bitcoin to deal with the related risks and potential conflicts of interest**
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The two senators wrote to Abigail Johnson, CEO of fidelity investment, on May 4, after the company announced late last month that it plans to allow employees participating in its 401 (k) pension plan to open digital asset accounts, allowing these users to directly invest 20% of their pension account balance in bitcoin without opening an account on the cryptocurrency exchange.
Fidelity Investment, which manages $2.7 trillion of assets for 20 million customers, is the first large pension plan provider to take this measure.
The two senators wrote in the letter: "in short, investing in cryptocurrency is a high-risk speculative gamble. We are worried that fidelity will bear these risks with the retirement savings of millions of Americans," and asked fidelity to answer a series of questions about its bitcoin investment method by May 18.
"Your company believes bitcoin is robust enough for customers' retirement savings accounts, but its history is particularly volatile," Warren and Smith wrote
In their letter, they pointed out that bitcoin soared to a high of nearly $69000 last November, but fell to $33000 more than two months later, with a maximum one-day decline of 30%.
The letter also mentioned the impact of Tesla CEO Elon Musk on the price of bitcoin, saying that "the reason why bitcoin is more volatile is that it is vulnerable to the whims of a few influential people. Elon Musk's tweets alone have led to bitcoin price fluctuations of up to 8%."
They also asked about the possible fraud and theft risks of bitcoin investment and expressed concern about Fidelity's "potential conflict of interest". They pointed out that fidelity said in a 2017 statement that it had established a small bitcoin and Ethereum mining business and subsequently expanded encryption activities, including opening an encryption fund for wealthy investors.
"When fidelity decided to allow bitcoin to be sold in retirement accounts, how did it resolve its conflict of interest, considering that the company is now both a digger and a provider of bitcoin?" they asked
Fidelity Investment said late last month that the plan allows employees participating in its 401 (k) pension plan to open digital asset accounts, allowing these users to directly invest 20% of their pension account balance in bitcoin without opening an account on the cryptocurrency exchange.