In the letter dated Wednesday, the two Democrats also said Fidelity has potential conflicts of interest. The letter asked for information on the extent to which those potential conflicts might have affected the decision to offer bitcoin. Ms. Warren and Ms. Smith said Fidelity might have a conflict offering bitcoin in retirement funds because it has mined bitcoin and offers a crypto fund for wealthy investors.
“Investing in cryptocurrencies is a risky and speculative gamble, and we are concerned that Fidelity would take these risks with millions of Americans’ retirement savings,” the senators wrote in the letter addressed to Fidelity Chief Executive Abigail Johnson.
The comments echo recent statements from senior officials at the Labor Department, which regulates employer-sponsored retirement plans. Fidelity has embraced crypto in recent years and said that there has been customer interest in making the digital assets available in retirement plans.
On April 26, Fidelity said that starting later this year, it will give the 23,000 companies that use it to administer their retirement plans the option to put bitcoin on the menu of investment options. Workers in plans that offer bitcoin could allocate as much as 20% of their nest eggs to it, although employers can reduce that threshold.
Sens. Warren and Smith are members of Senate committees that have jurisdiction over matters that pertain to retirement. Ms. Smith serves on the Senate Committee on Health, Education, Labor and Pensions and Ms. Warren is on the Special Committee on Aging.
Ms. Warren has long focused her efforts on banks, asset managers and others in the financial services industry. Boston-based money manager Fidelity is one of the largest private employers in Massachusetts.
The Warren-Smith letter asked Fidelity to explain how it plans to address the risks relating to bitcoin by May 18.
In an email, Fidelity said, “As a Massachusetts-based company with a proven 75-plus-year history of doing what’s in the best interest of our customers, we look forward to continuing our respectful dialogue with policy makers to responsibly provide access with all appropriate consumer protections and educational guidance for plan sponsors as they consider offering this innovative product. Consistent with our ongoing dialogue with regulators and policy makers, we will respond directly.”
Fidelity created a business in 2018 to store and trade bitcoin for sophisticated investors such as hedge funds. Bitcoin bought or sold in Fidelity-administered 401(k) accounts would be held on that platform to ensure institutional-grade security, Fidelity said in its press release announcing the bitcoin offering.
The senators’ letter comes just a few days after Ali Khawar, acting assistant secretary of the Labor Department’s Employee Benefits Security Administration, in an interview with The Wall Street Journal, expressed concerns with Fidelity’s bitcoin offering.
In March 10 guidance about crypto generally, the Labor Department cited factors including the cryptocurrency market’s volatility. Since November, bitcoin has lost about 40% of its value.
Mr. Khawar said he thought cryptocurrency needs maturing before people can put their retirement savings into it, including the development of consumer protections.
The Labor Department said in its guidance that employers offering cryptocurrencies should expect questions from regulators.
The senators noted that the price of bitcoin has been highly volatile, even moving on the basis of tweets.
“Bitcoin’s volatility is compounded by its susceptibility to the whims of just a handful of influencers,” the letter said. “Elon Musk’s tweets alone have led to Bitcoin value fluctuations as high as 8%.”
