Lawmakers Urge Fidelity to Drop Bitcoin Retirement Plan After FTX Crash

U.S. Senators today sent another letter to investment giant Fidelity Investments, warning it against offering Bitcoin to its customers following the collapse of crypto exchange FTX.

Senators Elizabeth Warren of Massachusetts, Tina Smith of Minnesota and Richard Durbin of Illinois all signed the letter asking Fidelity to scrap its 401(k) Bitcoin plan. 

Boston-based Fidelity, one of the world’s largest asset managers, is America’s largest provider of 401(k) savings accounts. In April, the firm launched a new product offering companies and their participating employees access to Bitcoin. 

But in May, the Senators Warren and Smith sent a letter to Fidelity telling them it was a bad idea. This time round, a new letter was sent, additionally signed by Senator Durbin.

“Once again, we strongly urge Fidelity Investments to reconsider its decision to allow 401(k) plan sponsors to expose plan participants to Bitcoin,” Monday’s letter said. 

“The recent implosion of FTX, a cryptocurrency exchange, has made it abundantly clear the digital asset industry has serious problems,” the senators added.“The industry is full of charismatic wunderkinds, opportunistic fraudsters, and self-proclaimed investment advisors promoting financial products with little to no transparency.” 

FTX was once one of the biggest cryptocurrency exchanges, but went bust this month after it lost billions of dollars of investors’ cash. The exchange was allegedly using client money to make risky investment bets through its sister trading firm Alameda Research. 

A document filed Saturday by FTX showed the exchange owes $3.1 billion to its top 50 creditors.

Notably, FTX is also one of the biggest contributors to political campaigns: the former CEO of the exchange Sam Bankman-Fried was among the top-20 largest donors to Joe Biden’s 2020 U.S. presidential campaign, contributing $5.2 million. 

The crash rocked the crypto market and most digital assets have plunged following the news. 

Today’s letter added that the U.S. was “already in a retirement security crisis” which “should not be made worse by exposing retirement savings to unnecessary risk.”

Fidelity currently has over $9.9 trillion under its administration and has made major inroads into the world of digital assets. 

Earlier this month it announced an early-access waitlist for its latest crypto product: an app allowing retail investors trade Bitcoin and Ethereum from their phones without paying commission fees.