Fidelity Investments made waves in the retirement-planning industry when it became the first of the major record-keepers to roll out Bitcoin for 401(k) plans. But fintech start-ups are moving in as well.
In April, Fidelity said that some of the 401(k) plans it administers would soon offer employees a way to invest in Bitcoin through dedicated “digital assets accounts.” The plan administrator, which oversaw $2.7 trillion in 401(k) assets spread over 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 situation.
Employers that are considering adding Bitcoin to their 401(k) plans need to do due diligence and obtain the necessary approvals before they can offer it, the person said. This process can take several months, while Fidelity would need about 90 days to implement it, the person said.
MicroStrategy (ticker: MSTR), a software company, was the first company to sign up. But more are expected. Fidelity said Thursday that it has seen strong interest from employers. “In fact, client interest has not only been strong, but also spans across a wide range of industries and company sizes,” it said in a statement.
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 reiterated warnings about the dangers of crypto in 401(k)s. Fidelity said it is continuing a “respectful dialogue” with regulators and policy makers.
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 Bitcoin IRA, which lets users invest in 65 cryptocurrencies, including Ethereum, Solana and Bitcoin . Launched in 2016, Bitcoin IRA allows customers to roll over their 401(k)s or IRAs and begin buying crypto, COO Chris Kline told Barron’s. Bitcoin IRA has 150,000 users and $2 billion in assets under custody, he said.
The start-up is mainly self-funded and has no plans to bring in outside capital, he said. “We don’t have anything on the roadmap right now,” Kline said.
There is also ForUsAll, a 401(k) provider that is working with Coinbase Global (COIN) to offer a platform that would let workers invest in cryptocurrencies. Founded in 2012, ForUsAll plans to launch the Alt 401(k) product later this summer, according to a spokesman. “We have over 150 customers on the waiting list for crypto,” he said. The start-up has raised more than $43 million in funding.
Swan Bitcoin is launching an IRA that lets consumers 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 into 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 lets its 65,000 users buy Bitcoin. The start-up has raised $8.5 million in funding, including a $6 million A round in November, according to a statement. It plans to raise a Series B round in the fall with a $30 million target, Klippsten said.
Prime Trust provides the infrastructure that helps financial services companies offer crypto. This includes the Application Programming Interfaces, or APIs, that companies like Swan, which is a Prime customer, use to open accounts for their clients. In June, the start-up collected $100 million in a Series B round, bringing total funding to $170 million, according to CEO Tom Pageler.
He expects widespread adoption 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 use [Bitcoin] to retire,” he told Barron’s.
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