Fidelity Investments made waves in the retirement planning industry when it became the first of the major record holders to roll out bitcoin for 401(k) plans. But fintech startups are also moving in.
In April, Fidelity said some of the 401(k) plans it manages will soon offer employees a way to invest in bitcoin through dedicated “digital asset accounts.” The plan administrator, which oversaw $2.7 billion in 401(k) assets among 20.4 million investors as of Dec. 31, is waiting to see which employers sign up for the bitcoin option, according to a person familiar with the matter the situation.
Employers considering adding bitcoin to their 401(k) plans must do due diligence and get the necessary approvals before offering it, the person said. That process could take several months, while Fidelity would need about 90 days to implement it, the person said.
MicroStrategy, a software company, was the first company to sign up. But more is expected. Fidelity said on July 21 that it has seen strong interest from employers. “Indeed, customer interest has not only been strong, but also spans a wide range of industries and company sizes,” it said in a statement.
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Fidelity said the first employers to offer a bitcoin option in their 401(k)s will make it available in the fall.
The investment management company, meanwhile, has faced pushback from Congress and the Labor Department, which has repeated warnings about the dangers of crypto in 401(k)s. Fidelity said it continues a “respectful dialogue” with regulators and policymakers.
While Fidelity was the first major plan administrator to offer a bitcoin option for 401(k)s, several fintechs have offered crypto access to consumers, or plan to do so, mainly through individual retirement accounts.
Consider the bitcoin IRA, which allows users to invest in 65 cryptocurrencies, including ether, solana, and bitcoin. Launched in 2016, Bitcoin IRA allows customers to roll over 401(k)s or IRAs and start buying crypto, COO Chris Kline said. Barron’s. Bitcoin IRA has 150,000 users and $2 billion in assets under custody, he said.
The start-up is mainly self-financed and has no plans to raise external capital, he said. “We don’t have anything on the road map right now,” Kline said.
There is also ForUsAll, a 401(k) provider that is working with Coinbase Global to offer a platform that allows workers to invest in cryptocurrencies. ForUsAll was founded in 2012 and plans to launch its All 401(k) product later this summer, according to a spokesman. “We have over 150 customers on the crypto waiting list,” he said. The startup has raised more than $43 million in funding.
Swan bitcoin is launching an IRA that allows consumers to use their retirement accounts to buy bitcoin, according to CEO Cory Klippsten. Customers can start a new IRA, either traditional or a Roth, or they can roll over an existing IRA to Swan, he said.
Swan has about 100 customers for the IRA and plans to aggressively market the product when it launches in the third quarter, he said. “We’ve had so much demand for this for so long,” Klippsten said. Swan, founded in 2019, is known for its app, which allows its 65,000 users to buy bitcoin. The startup has raised $8.5 million in funding, including a $6 million round in November, according to a statement. It plans to raise a Series B round in the fall with a target of $30 million, Klippsten said.
Prime Trust provides the infrastructure that helps financial companies offer crypto. This includes Application Programming Interfaces, or APIs, that companies like Swan, which is a Prime customer, use to open accounts for their customers. In June, the startup raised $100 million in a Series B round, bringing its total funding to $170 million, according to CEO Tom Pageler.
He expects widespread use of bitcoin in retirement vehicles, mainly because customers are asking for it. “With the whole market down, a lot of people want to diversify their holdings. Baby boomers will want to spend [bitcoin] to retire,” he told Barron’s.
Write to Luisa Beltran at [email protected]
This article was published by Barron’s, a division of Dow Jones
