ForUsAll Drags DOL to Court Over ‘Grave Concerns’ With BTC in 401(k)

Key Insights:

• Retirement plan provider sued the US Department of Labor over recent anti-crypto guidance.
• One-third of clients spoken with since the guidance are holding back on crypto options.
• The Labor Department said ‘grave concerns’ citing Fidelity Investment’s plan for bitcoin in retirement.

Crypto enthusiasts wondering if bitcoin (BTC) could enter their retirement savings had a sigh of relief in April when Fidelity Investments brought cryptocurrencies into 401(k) accounts.

However, cryptos are highly volatile, which was recently proved in the Terra (LUNA), and TerraUSD (UST) crashes, leading investors shocked. Additionally, they have little practical use, given their vulnerability in crimes and the lack of real-world cash flows.

This was the very reason the US Department of Labor had “grave concerns” when Fidelity included bitcoin in retirement plans.

Additionally, DOL published a sternly worded guidance in March, revealing heightened skepticism of 401(k) cryptocurrency investments. The department, which regulates 401(k)-type plans, cautioned retirement fiduciaries to take “extreme care” before adding cryptos into their plans.

DOL under the mallet

Quoting the department’s anti-crypto compliance release, a San Francisco-based 401(k) retirement provider, ForUsAll, filed a lawsuit against DOL on Thursday.

The company said that it is seeking the withdrawal of DOL’s cautionary release, citing the Administrative Procedure Act (APA). The filing noted,

“This lawsuit seeks to preserve the rights of American investors to choose how to invest money in their own retirement accounts. Brought under the APA, this lawsuit challenges DOL’s arbitrary and capricious attempt to restrict the use of cryptocurrency in defined contribution retirement plans.”

ForUsAll accused DOL of focusing only on the risks of cryptos without mentioning its potential benefits, including diversification. 

The DOL has taken the “opposite course” by issuing the release, despite the Biden administration directing federal agencies to work on the development and use of cryptos, the firm stated.

“DOL’s issuance of the Release was arbitrary, capricious, and otherwise not in accordance with law and in excess of DOL’s statutory authority, in violation of the APA.”

According to ForUsAll, one-third of the clients that the company spoke with said, despite their interest in inculcating cryptos, “they do not intend to proceed at this time in light of enforcement threats.”

The retirement provider let workers in retirement plans under its administration invest up to 5% of their 401(k) contributions in bitcoin, ether (ETH), litecoin (LTC), ripple (XRP), and other cryptocurrencies.

ForUsAll CEO Jeff Schulte told CoinTelegraph,

“The government is suddenly trying to restrict the type of investments Americans can choose to make because they’ve decided today that they don’t like a certain asset class. They’re clearly trying to effect a ban, and they don’t have the legal authority to do so.”

Implications still remain

Several crypto advocates have offered various justifications saying Americans deserve more choice in their retirement plans. Surveys have also shown that particularly millennials tend to see crypto as a desirable investment. Advocates say that crypto investments can diversify a given portfolio as their price fluctuations aren’t synced with other markets.

On the other hand, investors have had enough hard times navigating the US retirement savings system without adding an option that even professional investors struggle to hold. 

Challenges like crypto’s limited track record, bitcoin’s latest unexpected slide, which is more than 50% from its November 2021 peak, and technical difficulties such as ensuring safe custody in a largely unregulated realm, remain to be addressed.