Employer-sponsored retirement accounts are an arena long-dominated by index funds and actively managed mutual funds. Bitcoin is usually the furthest thing from workers’ minds when making allocation decisions in their 401(k) plans, but Fidelity is aiming to change that.
On Tuesday, the fund and 401(k) giant announced the launch of Fidelity’s workplace Digital Assets Account (DAA), which will allow plan participants to direct a portion of their 401(k) savings to bitcoin. Interestingly, MicroStrategy (NASDAQ:MSTR), the software company and bitcoin miner known for holding the largest cryptocurrency on its balance sheet and selling corporate debt to buy more of it, is the first company to embrace the new Fidelity offering.
DAA will be more broadly available late this year. It remains to be seen how many companies embrace DAA, but it’s possible the number will be sizable simply because Fidelity is one of the largest 401(k) providers in the country. In other words, this could be a positive for bitcoin bulls that so frequently ring the adoption/usage case bell.
Fidelity Has Long Crypto History
As has been widely noted, crypto is a young asset class, relatively speaking. Bitcoin is just 13 years and all of its credible rivals are even younger. However, perhaps to the surprise of some advisors, Fidelity was fairly quick entrant to the digital assets landscape.
“Fidelity began its exploration of blockchain technology in 2014 with bitcoin mining and in 2018 launched its first commercial offering: Fidelity Digital AssetsSM, a platform that offers custody and trade execution for digital assets to institutional investors. In 2020, Fidelity’s digital asset management business launched a private bitcoin fund that is currently available to accredited investors,” according to the company.
More recently, Fidelity dipped its toes into the crypto-correlated equities side of the equation, introducing the Fidelity Crypto Industry and Digital Payments ETF (FDIG) and the Fidelity Metaverse ETF (FMET). Those ETF launches further affirm Fidelity’s commitment to digital assets – a relevant point for the myriad doubting Thomases surrounding this asset class.
Getting back to DAA 401(k) plan, there’s evidence indicating Fidelity is onto something here and long-term growth could be impressive.
As noted by the he Fidelity Digital Assets 2021 Institutional Investor Digital Assets Study, nearly a third of institutional investors are interested in digital assets and close to 80 million investors hold cyrptocurrencies in portfolios.
“There is growing interest from plan sponsors for vehicles that enable them to provide their employees access to digital assets in defined contribution plans, and in turn from individuals with an appetite to incorporate cryptocurrencies into their long-term investment strategies,” said Dave Gray, Head of Workplace Retirement Offerings and Platforms at Fidelity Investments.
Fidelity will provide more details on DAA in the months ahead, but for now, there’s already budding momentum for the concept that extends beyond MicroStrategy.
For example, Newfront, a provider of retirement consulting services, says clients want more exposure to digital assets.
“Bitcoin in the DAA will be held on the Fidelity Digital Assets custody platform to ensure institutional-grade security. Plan sponsors electing to offer the DAA establish employee contribution and exchange limits into the account. Employees will benefit from a fully integrated retirement plan, digital experience and education to help them make informed decisions,” concludes Fidelity.