The US Department of Labor is receiving pushback from an industry initiative requesting it to rescind its previous guidance on including crypto in 401(k) plans.
The Crypto Council for Innovation (CCI) comes out with support from Coinbase and Block, and is asking the US Department of Labor to withdraw guidance it issued earlier in March, asking consumers to allocate crypto to 401(k) plans. Warns about the dangers of doing Notably, the department is facing scrutiny for focusing too little on the risks of crypto, while neglecting its benefits.
401(k) Struggle for Freedom
The US Department of Labor initially expressed concerns about the inclusion of crypto in 401(k) plans in March.
Ali Khawar, acting assistant secretary of the US Department of Labor, told the Wall Street Journal at the time that the department “will offer participants cryptocurrencies or related products such as NFTs, coins, and crypto assets.”
The first retirement provider to take out the blood in April was Fidelity Investments, which has already provided retirement plans to 23,000 companies. It also announced that it was creating “digital asset” accounts in its 401(k) plans.
Fidelity’s announcement immediately prompted a reaction from the Labor Department, which expressed “serious concern” with what Fidelity had done, and advised that firms offering 401(k)s expect an investigation into this. How will they carry out their tasks “with their duties of discretion and loyalty.”
Enter CCI, an industry group that backs the largest crypto exchange in the US, Coinbase, and Jack Dorsey’s payments company, Block, formerly known as Square.
The industry group has clearly indicated it wants the Labor Department to rescind the guidance it issued in March and protect retirement plan managers against claims of breach of duty.
,[The Department of Labor] Considers only the risks of cryptocurrencies while disregarding their potential benefits, including growth and portfolio diversification. As with any other type of investment option, plan trustees must consider both the risks and potential benefits of cryptocurrencies,” said CCI CEO Sheila Warren to Barron.
The CCI also claims that the Labor Department’s comments are inconsistent with President Joe Biden’s executive order issued in March, which tasked various departments to study crypto and present its findings.
Republicans are joining in as well. In May, Senator Tommy Tuberville (R-Ala) introduced the “Financial Freedom Act,” an act aimed at limiting the powers of the Labor Department that investment retirees can participate in.
There are two important allies in the battle for DOL
However, the department has secured two aides – Senator Elizabeth Warren (D-Mass.) and Senator Tina Smith (D-Min.), a well-known crypto critic. The two senators wrote a letter to Fidelity, asking why the company ignored guidance from the Labor Department in March and how the company would mitigate the risks associated with bitcoin.
In response, Fidelity pledged to continue negotiating with lawmakers, as it does for all of its new products. Fidelity plans to introduce digital asset allocation in 2023, allowing investors to allocate up to 20% of their portfolios to digital assets in one account.
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