Lawmakers and investor advocates are ringing alarms over the idea of allowing cryptocurrency into 401(k) and other retirement plans, especially after a turbulent month that saw some projects implode and other cryptocurrencies go into free fall.
The debate kicked off in March when the Labor Department posted a compliance release that said those in charge of 401(k) retirement plans should “exercise extreme care” when contemplating adding cryptocurrencies to investment options. A month later, one of the largest financial service providers, Fidelity Investments, said it would offer the option to invest part of 401(k) plans in bitcoin.
ForUsAll, a 401(k) provider, sued the Labor Department this month, saying the warning violated the law that governs how federal agencies develop and issue rules. The California-based company said the department has no legal authority or existing precedent and said its guidance was issued suddenly and without public comment.
ForUsAll argued in its suit, filed in U.S. District Court for the District of Columbia, that the department’s cautionary release sets a precedent and could embolden it to ban other investment types or strategies.
“The DOL plays several important roles that serve American workers — but ‘armchair financial adviser’ shouldn’t be one of them,” Jeff Schulte, CEO at ForUsAll, said in a statement. “Congress never gave government officials the power to pick winners and losers, let alone the legal authority to arbitrarily restrict entire asset classes.”