US Treasury Sec says Crypto is Unsuitable For Retirement Investment

Key Takeaways

  • US Treasury Secretary Janet Yellen has warned those who choose Bitcoin (BTC) as an investment product for their 401(k) retirement plans.
  • Yellen feels Fidelity’s latest intend to introduce Bitcoin as an investment option for employee retirements is risky, but it could become more rational if regulators engage.
  • The Labor Department earlier voiced fears about Fidelity’s plan, asserting that digital assets must mature before they can be reliably allocated to people’s retirement accounts.

Janet Yellen, an American economist and the 78th US Secretary of Treasury, has stated that investing in cryptocurrencies should not be part of one’s retirement plan.

Yellen asserts that financial firms giant Fidelity’s popular program that offers Bitcoin as an investment product for employee retirement plans is unreliable, but that it could be more sensible if regulatory authorities took action, according to a new interview with The New York Times.

Yellen stated, “It’s not something I’d recommend to most people trying to save for retirement… It appears to me to be a very risky investment.”

Fidelity’s statement came after the Labor Department (DOL) released guidelines advising 401(k) plan administrators about the risks of allowing cryptocurrencies in retirement plans. Fidelity is one of the largest administrators of 401(k) plans.

According to the guidelines, the Department has significant concerns about a fiduciary’s proposal to publicize a 401(k) plan’s participants to initiate investments in cryptocurrencies, or other products whose value is attached to cryptocurrencies, at this preliminary phase in the history of cryptocurrencies. Participants’ retirement accounts encounter significant potential challenges as a result of these investments, including substantial risks of fraud, theft, and loss.

Yellen’s stance on cryptocurrency is extra vigilant. She spoke out against the Bitcoin industry on several occasions last year.  BTC was quickly labelled by Yellen as a wildly dubious asset that was ineffective for transactions.

Congress, according to Treasury Secretary Yellen, could start regulating what assets can be included in retirement plans such as 401(k)s (k). In response to a question about whether Congress should act, Yellen made clear:

“Tax laws have created an opportunity to save in tax-advantaged ways, and if Congress wanted to get involved in legislating in this area and say, ‘We’ve given tax incentives for 401(k)s and retirement plans, and now we want to regulate what form those savings can take,’ that would be legitimate in my opinion.”

“I’m not saying it’s a good idea, but it seems reasonable to me.”

The Department of Labor had previously expressed reservations about Fidelity’s plan, claiming that digital assets must mature before they can be securely apportioned to people’s retirement accounts.

The Labor Department has “grave concerns” about what Fidelity has done, according to Ali Khawar, Acting Assistant Secretary of the DOL’s Employee Benefits Security Administration. “Cryptocurrencies can pose serious risks to retirement savings,” he said.

Some legislators have been angered by the Labor Department’s efforts to prevent Americans from putting cryptocurrency in their retirement accounts. 

Senator Tommy Tuberville (R-AL) responded by introducing the Financial Freedom Act, which would prevent the Department of Labor from “issuing a regulation or guidance that limits the type of investments that self-directed 401(k) account investors can choose through a brokerage window.” In addition, the Department of Labor has been sued over its crypto guidelines.

Fidelity first announced its plan to allow customers to choose Bitcoin for their 401(k)s in April, but only up to 20% of a person’s holdings can be in BTC.

Consumer demand, as per Fidelity, was the driving force behind the choice.

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Aadrika Sharma

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