Bitcoin is far from the fringe currency it once was; just this week El Salvador even became the first country to vote in favor of the cryptocurrency becoming legal tender. Today bitcoin takes another step into the mainstream adoption, thanks to Coinbase and ForUsAll, a 401(k) provider. The companies will be working together to allow ForUsAll retirement funds to invest up to 5 percent of their 401(k) contributions in bitcoin, litecoin, and a few other cryptocurrencies.
Not every employee with a ForUsAll account will be able to invest their savings in crypto, though — the employee’s company will need to sign up for the new cryptocurrency program first. When asked how many ForUsAll employers have signed up for the program thus far, the company declined to comment.
ForUsAll is relatively small, as far as retirement fund companies go; it was founded just over eight years ago and handles approximately $1.7 billion in retirement assets, according to The Wall Street Journal. That’s a very minor piece of the $22 trillion retirement-account market.
Small though it may be, ForUsAll’s bitcoin adoption is significant in that it’s a first. It won’t be the last.
The first of many? — Retirement accounts are very steadfast in their traditional finances. They’re all about feeling secure in your finances for the long-term — that’s the entire reason they exist. So it’s no surprise many 401(k) companies refuse to even consider adding cryptocurrency their portfolios.
But ForUsAll is setting a precedent here and it hasn’t gone unnoticed. The 401(k) industry is having “meaningful conversations” about adding alternative investments to their plans, according to Lew Minsky, president of the Defined Contribution Institutional Investment Association.
Some financial analysts see cryptocurrency as just another asset class, arguing that diversifying assets increases the chance of higher returns on investment in the future. Paul Selker, president of Spark Street Digital, says he expects the addition of bitcoin to make 401(k) accounts more attractive to his employees, many of whom are Millennials.
He says as well that ForUsAll has built-in “guardrails” for employees, like alerts for when crypto assets should be redistributed to other assets.
Barriers to entry — Getting into cryptocurrency can be difficult, especially for newcomers uninitiated in blockchain technology. It’s also very, very volatile — unlike fiat currency, the value of bitcoin can spike and fall within the span of a single day. (Or, in the worst of cases, with a single tweet from Elon Musk.)
That volatility isn’t going anywhere any time soon, even as we edge ever closer toward mainstream adoption. Companies like ForUsAll will have the heavy burden of educating their users about the dangers associated with investing in cryptocurrency.