Michael Hiltzik: Thinking of putting crypto in your 401(k)? Think twice

Michael Hiltzik, Los Angeles Times on

Published in Business News

The federal government has some advice for workers contemplating adding bitcoin or another cryptocurrency to their retirement holdings: Don't.

The advice is not exactly new. The Department of Labor, which oversees employer-sponsored retirement offerings such as 401(k) plans, first warned plan sponsors in March to "exercise extreme care" before opening those plans to cryptocurrency investments.

"These investments present significant risks and challenges to participants' retirement accounts, including significant risks of fraud, theft and loss," the agency said.

Since then, the hazards for investors in the cryptocurrency markets have only become more evident.

They've been underscored by the collapse earlier this month of FTX, a leading crypto exchange whose founder, Sam Bankman-Fried, had become the fresh-faced spokesman for the security of those markets and their potential to generate investment gains.

FTX filed for bankruptcy protection on Nov. 11, amid allegations of financial wrongdoing and evidence of spectacularly careless and chaotic internal operations. It was the second major player to file for bankruptcy in four months, following that of Celsius Networks, which also had been seen as a high-flying and secure player in the field.


Celsius filed for bankruptcy on July 13, an abrupt collapse that has left an untold number of its 1.7 million customers financially devastated.

It isn't clear whether these debacles will cool the efforts of investment promoters to entice average working men and women into the crypto wild west.

Among the firms leading the charge has been Fidelity Investments, which administers retirement plans for about 35 million enrollees holding about $1.4 trillion in assets. Fidelity announced earlier this year that it would start allowing plan sponsors to offer their employees the option of investing in bitcoin.

Is that a wise policy? Democratic Sens. Elizabeth Warren of Massachusetts, Dick Durbin of Illinois and Tina Smith of Minnesota don't think so. In a Nov. 21 letter, they asked Fidelity to reconsider.


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