“First, I find it difficult to see how offering crypto in retirement plans at this point in the market's evolution is prudent,” Micah Hauptman, CFA’s Director of Investor Protection said in an interview.

“I worry that service providers and plan sponsors may be trying to offer shiny objects to investors that are really just investment fads and speculation schemes. Such an approach would not be consistent with engaging in a prudent and objective analysis about what is best for plans and their participants,” the former SEC staffer said.

Hauptman also warned that service providers that offer crypto to plans ultimately may be doing plan sponsors a disservice “because it's plan sponsors who will be at increased risk of fiduciary liability for these decisions.”

The SEC and Labor Department’s warnings could provide support to any claimants in potential future litigation against companies and their fiduciaries.

But Fidelity said on Tuesday that it has been developing the 401(k) bitcoin and cryptocurrency offering for some time.

Unlike regular bitcoin trading, which trades and reprices 24 hours a day, Fidelity plans to update its price once a day, like traditional mutual funds do.

Fees on the accounts are expected to range from 0.75% to 0.90% of assets, Fidelity said.

While Fidelity is the first big 401(k) platform to offer bitcoin inside 401(k) plans, it is not the last. In fact, ForUsAll, a 401(k) provider, announced in June 2021 that it is planning to offer cryptocurrencies to 401(k) participants through a separate a self-directed window. Partcipants will be required to take an interactive quiz about risks before they can invest.

Fidelity also plans to put educational materials in front of 401(k) participants before they buy cryptocurrencies, in order to get them to study and understand the risks.

While Fidelity’s announcement may encourage other broker-dealers to ramp up 401(k) cryptocurrency offerings, demand from employers is still building.

Some 57% of employers said they “would never” see cryptocurrencies as a viable investment option, according to the findings of a Plan Sponsor Council of America survey. Another 30% of employers said the recent DOL warning “simply affirms the concern we already had.”

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