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US: Fidelity Investment’s Bitcoin Retirement Plan Stirs Political Storm

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In the US, Cryptocurrency has become the latest political flashpoint. Last month Fidelity Investments’ announcement of offering bitcoin as an investment option in its 401(k) plans by the middle of the year, ruffled a few feathers.

One of them is the long-time crypto critic Sen. Elizabeth Warren who expressed concern that the investment firm might be exposing clients to a “risky and speculative gamble.” 

Republicans defended Fidelity by accusing Democrats of “governmental overreach and infringing on Americans’ free-market rights.”

On 20th May, Republicans floated a new bill dubbed “The Financial Freedom Act” which aimed at preventing the Labor Department from restricting investment options available to employees in self-directed retirement accounts.

The proposed bill if passed might enable Americans to add cryptocurrency to their 401[k] plans if they choose to do so. 

Interestingly, the decision by Fidelity followed after the Labor Department warned that firms investing their employees’ contribution plans in digital assets including Bitcoin, would invite legal action.

In a notice dated March 10, the DOL Employee Benefits Security Administration said fiduciaries “must exercise extreme care” before including direct investment options in crypto. 

Fidelity objected to that guidance, and shot out a letter saying that the DOL failed to provide information on how fiduciaries can “fulfill their fiduciary duties in assessing cryptocurrencies.”

US’s DOL vs Fidelity

Remaining defiant, the investment firm has announced that it will allow customers to put 20% of their savings into bitcoin; other cryptocurrencies will likely be added later. 

Sen. Tommy Tuberville, R-Ala who also oversaw similar crypto-friendly legislation stated,

“The government has no business standing in the way of retirement savers who want to make their own investment choices,” Tuberville said. “When you’ve earned your paycheck, how you invest your money should be your decision. Our legislation makes sure that is the case.”

While Republicans and Democrats might exploit crypto for political mileage, one thing is certain, crypto has broadened the scope of investment among individuals of all ages.

Not just biggies but even lesser-known firms have been instrumental in making virtual currencies more mainstream.

A Nebraska-based crypto wallet firm Exodus pays its staff in bitcoin. One of its employees, Denver native Alyssa Howell managed to finance a house and save for retirement with her cryptocurrency earnings.

Cryptocurrency to save retirement plans? Here’s what Alabama senator has to say

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According to a piece released by Alabama Senator Tommy Tuberville earlier today, the Republican politician supports allowing Americans to use cryptocurrency in their retirement funds. He has also presented the Financial Freedom Act, which would ban the US Department of Labor from restricting retirement plan investment options.

The US Department of Labor issued regulatory recommendations on March 10 in an attempt to prohibit cryptocurrency investments in 401(k) accounts, singling out this specific investment type. Tuberville believes that the Labor Department’s guidelines threaten to examine plans that allow participants to choose cryptocurrency investments, including brokerage windows, a mechanism that allows 401(k) plan participants to self-select their investments. He further added,

“The federal government has no business interfering with the ability of American workers to invest their 401(k) plan savings as they see fit.”

It stands true that this policy shift contradicts long-standing practices. Employers have long been allowed by the Labor Department to provide brokerage windows to employees who choose to manage the money they worked so hard to earn. The new advice from the agency puts a stop to the agency’s long heritage of economic empowerment in favor of big-brother government control.

Furthermore, the Labor Department’s overreaching guideline aims to impose a significant additional regulatory burden on 401(k) plan fiduciaries by requiring them to review the suitability of assets offered through a brokerage window and to limit investment possibilities. If a company or financial firm permits their 401(k) investors to invest in Bitcoin, they will now be subject to harsh punitive measures.

Will this new policy backfire on Fidelity’s cryptocurrency plan?

Fidelity Investments has announced that employers will be able to add Bitcoin to their 401(k) plans. Workers will be able to invest up to 20% of their assets in Bitcoin, potentially boosting Bitcoin adoption.

26crypto401k jumbo

The initiative drew the attention of the Labor Department. Fidelity’s offering has caused the federal agency “great concern.” It issued recommendations advising businesses to avoid exposing employees to cryptocurrencies, citing investor protection as one of the major concerns.

Fidelity has criticized the guidance, calling it “constructive.” The Labor Department, on the other hand, has no intention of changing its stance. It should be emphasized, however, that the guidance does not ban Fidelity from offering Bitcoin retirement plans.

Bitcoin ETF applications continue to flood SEC’s doors

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Despite garnering immense attention from across the globe, several aspects of the crypto-verse remain untouched by many. For instance, Bitcoin exchange-traded funds [ETF] have never seen the light of the day in the United States. As more players enter the market, the need for new and efficient features has started to surge. However, regulatory entities, particularly in the US seemed to be appalled by this.

The Securities and Exchange Commission [SEC] of the US has received an array of Bitcoin ETF applications throughout the years. Despite the constant urge and need for a crypto ETF, the US clearly stated it wasn’t ready for a crypto ETF. Most of the applications were seen shown the door or postponed. This did not stop firms from diving into the field as applicants for Bitcoin ETFs are still knocking on the doors of the SEC.

Prominent financial services platform Fidelity Investments, as well as crypto asset, managed Bitwise, separately sent out ETF applications. While Fidelity had already sent out its application, the platform decided to drive SEC to approve its purpose.

Bitcoin ETFs are still making rounds

As per, Bitwise’s filling, instead of a regular Bitcoin ETF, the platform intends to roll out an ETF pegged to cash-settled Bitcoin futures contracts. With this application, the platform hopes to garner much more than just an ETF. The filling read,

“[…] to obtain exposure to Bitcoin primarily through indirect investments in standardized, cash-settled Bitcoin futures contracts traded on commodity exchanges registered with the CFTC.”

In an elaborate filling Bitwise explained to the SEC why its application should be approved.

In other news, Fidelity decided to take a step forward and urge the SEC to approve its ETF application. Fidelity Digital Assets’ president, Tom Jessop along with six others from the firm decided to meet with the officials of the SEC. In this privately held meeting, members representing Fidelity reportedly laid out reasons for the approval of an ETF in the country.

The executives pointed out various aspects that included the ever surging demand for cryptocurrencies and products related to them. Along with this, members noted how other countries were well ahead in the game, while the US was lagging behind.

Goldman Sachs To Offer Notes Linked To ETF That May Give Exposure To Bitcoin

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Goldman Sachs, the American multinational investment bank and financial services company has filed with the US Securities Exchange And Commission [SEC] to offer an investment product that could give exposure to its clients to cryptocurrency such as Bitcoin.

This new investment product is tied to the performance of the ARK Innovation ETF, which is capable of investing in Bitcoin and products and services inside the crypto-asset’s boundary. While Goldman Sachs filing is not for a Bitcoin ETF, however, the product that would track an ETF exposed to the share of the cryptocurrency indirectly via an investment in a grantor trust.

The filing by Goldman Sachs stated,

“The ETF is an actively-managed exchange-traded fund that will invest under normal circumstances primarily (at least 65% of its assets) in domestic and foreign equity securities of companies that are relevant to the ETF’s investment theme of disruptive innovation. The ETF investment advisor defines “disruptive innovation” as the introduction of a technologically enabled new product or service that potentially changes the way the world works.”

Goldman Sachs And Its Change Of Heart For Bitcoin

The news comes a couple of weeks after the international banking giant’s COO John Waldron had revealed exploring Bitcoin ETF and custodial services with the US regulator due to the growing demand for the underlying cryptocurrency. In addition, the bank had also recently rolled-out its cryptocurrency trading desk again in a bid to support futures trading for BTC.

It is important to note that Goldman Sachs is among the country’s banking organizations that have not been a fan of Bitcoin for the longest time. Just last year, the multinational bank had called that Bitcoin is “not an asset class”. However, the change of winds could essentially strengthen Bitcoin’s position in the traditional finance world.

Currently, there are seven Bitcoin ETF applications in the US apart from Goldman Sachs. They are – Fidelity, SkyBridge, Morgan Stanley/NYDIG, VanEck, Valkyrie, WisdomTree, and Bitwise. This essentially meant that Bitcoin is just a green light away from huge capital inflows.

Fidelity Subsidiary Plans To Launch Bitcoin ETF

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Bitcoin ETFs have become increasingly popular as Bitcoin continued to flirt with its ATH. Fidelity Investments becomes the latest entrant in the join the race and is now prepping up the roll-out of its own Bitcoin ETF. According to the official document, the investment giant’s affiliate, FD Funds Management, has filed with the US Securities and Exchange Commission [SEC] to seek approval for the “Wise Origin Bitcoin Trust,”

The preliminary filing revealed that “Wise Origin Bitcoin Trust” would hold the crypto-asset and value its shares on the basis of its prices from major cryptocurrency exchanges, such as Coinbase and Bitstamp.

Fidelity’s statement to Reuters read,

“The digital assets ecosystem has grown significantly in recent years, creating an even more robust marketplace for investors and accelerating demand among institutions. An increasingly wide range of investors seeking access to bitcoin has underscored the need for a more diversified set of products offering exposure to digital asset”

Fidelity-backed trust does not plan to sell the crypto-asset, but will rather use it to settle certain expenses, which under current guidance of the IRS will be deemed as a sale of such virtual currency.

Bitcoin ETF Gains Traction

The US SEC has rejected all the Bitcoin ETF proposals in the past. It had acknowledged a proposal from VanEck last week. In addition, there are four applications in total that are pending review by the authority which included- NYDIG Asset Management, WisdomTree Investments, Valkyrie Digital Assets, and VanEck Associates Corp.

Unlike its US counterpart, Canada’s regulatory authority has been quite progressive. In Feb-March, three Bitcoin ETFs went live back-to-back on the Toronto Stock Exchange after receiving the stamp of Bitcoin ETF.

Just last week Brazil became the first country in the Latin American region to approve the exchange-traded fund. This was launched by asset manager QR Capital and is slated to go live by June this year.

Hong Kong Regulators Give Fidelity-Backed Digital Asset Platform A Green Signal

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Seeking approval from financial regulators has become one of the biggest problems of the crypto industry. Hong Kong has been working towards regulating crypto platforms and even put in place laws to keep them in check. As a result of this, the crypto platforms operating in Hong Kong are mandated to have a license.  Abiding by these laws, a prominent digital asset firm, OSL had previously sought a license from the Securities and Futures Commission of Hong Kong.

Hong Kong Mandates The Need Of License For Crypto Platforms

In a recent announcement, OSL revealed that it would deliver its digital asset services to the corridors of Hong Kong. The platform is a part of BC Group which is backed by Fidelity. The Securities and Futures Commission [SFC] got an application for a license from OSL back in November and was the first to apply for a crypto license in the region. While the SFC gave the platform a thumbs-up back in August 2020, OSL reportedly brushed up on all the requirements that the SFC had asked for.

With this license, OSL can deliver an array of digital asset-related services to the citizens of Hong Kong. The platform is all set to open up trading for prominent cryptocurrencies like Bitcoin [BTC], Ethereum [ETH] along with several other assets. OSL Digital Securities will also allow users to avail select security token offerings [STOs].

The world seems to be coming to terms with the fact that the institutional interest has been zooming towards Bitcoin and other assets. Elaborating on the same, Wayne Trench, the CEO of OSL said,

“Institutions, and other professional investors, including HNWIs and family offices, can now trade digital assets with the region’s most comprehensive and trusted digital asset platform in OSL. Because the framework is under the auspices of a leading global regulator and modeled after existing licensing for financial services, clients can trade with confidence under the protections and safeguards to which they are accustomed.”

Regulators have been upping their game following the emergence of a number of crypto platforms. Digital asset platforms are making sure to comply with the laws put forth by regulators across the globe. OSL went a step ahead as the digital asset platform revealed that it had applied for a digital asset license under the Payments Services Act from the Monetary Authority of Singapore [MAS].

The latest license acquired by the OSL from the SFC makes the digital asset platform the first firm to attain a license from the SFC.

Bitcoin Still a Favorite as Fidelity Reveals Large Chunk of Institutional Investors Hold Crypto

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The cryptocurrency market has grown stronger over the years, and industry supporters have asserted that institutional investors will give it a much-needed break. Although many mainstream organizations have attacked the digital asset world because of its instability, it turns out that a big chunk was actually in the field.

A recent Fidelity analysis showed that one-third of all large-scale institutions were involved in cryptocurrencies or crypto-related products. The survey also noted that Bitcoin was the preferred cryptocurrency among organizations.

Fidelity has been a key player in the financial sector for the longest time and made major news when they announced their interest in cryptocurrency research and development. According to research, the United States had a maximum number of institutions invested in crypto. Thirty-six percent of the 774 strong sample size across the US and Europe revealed that they owned cryptocurrencies or some form of cryptocurrency derivatives.

Focusing on the United States alone, almost 27 percent of all institutions are involved in digital assets. These organizations included pension funds, family offices, digital funds, traditional hedge funds, and investment advisers. The same survey conducted a year ago showed that only 22 percent of institutions dealt with any form of virtual assets. In 2019, Fidelity surveyed 441 institutions, a long way from the most recent 774.

Bitcoin has been a key target for many institutional players due to its strong presence in the financial market. Over a quarter of the sample size surveyed hold Bitcoin while a decent 11 percent hold the Vitalik Buterin co-founded Ethereum. In the year to date spectrum, Bitcoin has jumped by a massive 36 percent due to its strong grip on the coronavirus face. At the same time, traditional stocks have plummeted across the board, causing widespread panic.

Tom Jessop, the President of Fidelity Digital Assets recently said in an interview that Europe was more supportive and accomodating than the US when it came to digital assets. He believed that Bitcoin outshone the traditional assets in terms of return or overall value. Jessop added:

“Europe is perhaps more supportive and accommodating, That could be just things going on in Europe right now, you got negative interest rates in many countries. Bitcoin may look more attractive because there are other assets that aren’t paying return. These results confirm a trend we are seeing in the market towards greater interest in and acceptance of digital assets as a new investable asset class.”

At press time, Bitcoin was trading for $9774 with a total market cap of $179.85 billion. After a relatively bullish run over the past week, Bitcoin’s 24-hour trading volume had risen to $22.794 billion. Bitcoin was not the only cryptocurrency that witnessed a decent price action over the past week as Tether rocketed up the charts to become the third-largest cryptocurrency, overtaking XRP.

Fidelity Breaks Through European Bitcoin Custody Markets with Latest Nickel tie-up

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On January 14, Fidelity Investments’ cryptocurrency arm revealed that they were soon launching into Europe’s markets. This comes after the company had success in the United States after launching last year.

The mainstream adoption of cryptocurrencies and blockchain technology has been seen as the foremost metric to measure the field’s success. This positive feeling has also been boosted by the entry of traditional players into the digital assets space, with Fidelity announcing a major leap recently. 

Fidelity Digital Assets will begin function as a custodian just for Bitcoin in London within the next few weeks. The Bitcoin in consideration is held by Nickel Digital Asset Management in London. Anatoly Crachilov, the Chief Executive Officer of Nickel gave his two cents on the partnership by saying:

“We can see this demand for our first fund, so it’s the right inflection point for the market to see this flow of substantial institutional capital. People are willing to go into it.”

Fidelity Digital Assets will be the Bitcoin fund’s principal custodian with the added help of Copper. Trident Trust. Copper, a popular brokerage service will be the fund’s administrator joined by KPMG as the auditor. The presence of such popular institutions is expected to bring in more investors to space, most dissuaded because of the ‘lack of market stability’.

Sources close to Fidelity have stated that the progress of mainstream companies in the fintech industry had quickened in the last couple of months. Chris Tyler, who is charged with running Fidelity’s Europe head, candidly stated that the hurdles for institutions were getting lower and lower as time progresses. According to him, factors such as regulation, quality of service providers and dynamic volatility were all resolving themselves.

Nickel’s presence in the tie-up is expected to create a secure institutional-grade gateway for users to enter the Bitcoin market. Bitcoin was the only cryptocurrency in the company’s blueprint right now because of how much the market relies on it. Experts have said that Europe was ready to rub shoulders with Bitcoin because of the growing interest from the American as well as Asian markets.

Conclusion

Bitcoin’s pull has been so massive in 2020 that it triggered a widespread bull run across the board. This price hike also caused several altcoins to surge in massive amounts. While last year Bitcoin was trudging near the $6000 region, at the moment, BTC was on its way to the $9000 region.

Crypto market game changers for 2019 Q1

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As you surely know already the current year has been a carnage for the cryptocurrency markets. Since last December’s mania phase, things have been going steadily down, and mid-November was even worse.

But if you know that, you also know that these fluctuations have happened before in crypto and, every time, the market comes back with a vengeance. It’s only a matter of time before a new bullish run hits the market and prices soar. When will that happen? We don’t really know, but it could be on next year’s Q1, and it could happen because of the developments we’ll detail for you in this article.

Nasdaq, Fidelity, and ErisX

Most of the cryptocurrency market is supported by retail investors simply because institutional investors (like Wall Street) have been distrustful of Bitcoin and the cryptosphere from the very beginning, so they’ve kept themselves away.

But the next bullish run could be supported by money injected by institutional players, and here’s one example. Nasdaq and Fidelity, who are giant financial players in the traditional financial markets are working together to launch and support a new crypto exchange (which would be designed precisely to be Wall-Street friendly) called ErisX.

“With increasing financial support from leading-edge firms, ErisX stands to provide the most robust, secure and regulated digital asset offering available to both institutional and individual participants,” according to Thomas Chiapas, the company’s CEO. “Closing this second round of funding enables us to continue building our modern platform and expand our team.”

If Wall Street really starts to take crypto seriously, it will be time to buy.

Bakkt

What is there in common between Microsoft and Starbuck’s beside the fact they’re super rich, dominant in their markets, and based out of Seattle? Well, the answer now is crypto.

Microsoft is joining forces with Starbucks and ICE (the company that owns and operates the New York Stock Exchange and many others in the world) to create Bakkt, which will be a digital platform that will provide financial services for end-users based on digital assets and blockchain technology.

This is not just about paying your espresso using Bitcoin (though it is also about that). It’s about institutional money entering abundantly the cryptomarkets thus reflecting confidence, creating demand for tokens, increasing trade volumes and, in general, making life better for retail investors as well.

The partnership is already announced and the new company will go online soon with a credibility that no other blockchain project can match (except for IBM since it partnered up with Stellar Lumens).

And that’s just the beginning

Bakkt and ErisX are just the most spectacular examples of things to come in crypto in the short term. But there’s a lot more in the works. Goldman Sachs and JPMorgan have been considering to enter crypto for months, and they will. They’ll also bring institutional money that will pump things up. Swiss financial institutions are also interested as well as a list of important South Korean investors.

So while there is no doubt that the market remains bullish, things are about to change because the big boys in finance are getting ready to jump in. Pay attention to that news, as they will probably signal the beginning of a new bullish run that will outperform all others.

Image courtesy of Pixabay.