Cryptocurrencies should be allowed to feature on 401(k) plans for the purpose of diversification of investment portfolios.
PALO ALTO, Calif., April 12, 2022 /PRNewswire-PRWeb/ -- Blockchain pioneer and HashCash chief, Raj Chowdhury, airs his views on adding crypto to 401(k) plans. While there is no hard and fast rule prohibiting this yet, it is the least offered option and is often discouraged.
As the inevitable happened sometime last year, clients with 401(k) plans and a crypto-struck employee population began quizzing if they could add cryptocurrency as a plan investment option. "In the 401(k) realm, even a self-directed brokerage window with built-in investment limitations is considered too risky. Hence the caution. Interested parties are practically on their own if they are at all permitted to add the alternative to their portfolio," said Chowdhury, explaining the scenario.
It is a known fact that cryptocurrency is a highly volatile asset. This gets confusing for even professional investors and expert traders. "This is the primary reason why it doesn't sit well with 401(k) retirement planning, where plan fiduciaries are accountable for choosing investments that balance long-term growth maintaining a certain level of stability asking reasonable fees," added Chowdhury.
Investment planners have for a long time shunned crypto as an investment alternative for the common people knowing of its links with several online illicit businesses and threat entities. However, cryptocurrency has since gone mainstream. "The idea of adding the alternative as a means of diversification of investment portfolio has occurred to many," he continued pointing out that there doesn't exist any clause under ERISA or Internal Revenue Code expressly barring the option.
The Department of Labor has, however, released a document that "cautions plan fiduciaries to exercise extreme care before they consider adding cryptocurrency to a 401(k) plan's investment menu for plan participants".
Chowdhury calls it a "starkly discouraging move" against cryptocurrency adoption. The primary risk to this investment comes in its volatility. The secondary risks associated with the digital assets appear in the scenarios of cyberattacks on exchanges, a crackdown on crypto mining, and other regulations including an outright ban.
Yet most of the secondary risks of cybercrime can be offset in retirement accounts by insuring plan custodians. Moreover, exchanges today have adequate safeguards and regulatory approvals in place. It must also be remembered that diversification can act as a shield against volatility.
Chowdhury has previously spoken out against a major crypto-curbing law enacted by the EU. He has predicted the payment solutions to be the opportunity-in-making for investors. Despite levying heavy taxation on crypto profits Chowdhury sees light in the legislation by the Indian government.
Chowdhury-led HashCash is soon to start working on a Metaverse project. HashCash product HC remit is deployed in a Vietnamese payment service company to channel overseas payments and remittances.
As more people are now inclined towards crypto as a potent investment instrument, it is only fair that they must not be deprived of the opportunity. This is more applicable in the case of millennials who are saving up as a part of their retirement savings.
- About Raj Chowdhury:
Raj Chowdhury is the Managing Director of HashCash Consultants and a Blockchain pioneer. Raj pioneered the first interbank Trade Finance and Remittance implementation of Blockchain Technology between two of the largest global banks. Raj is an eminent voice in the Blockchain and Cryptocurrency space and actively engages with policymakers in this area. He is a contributor to Economic Times, Business World, and CNNMoney and advises industry leaders in the adoption of Blockchain. He is a member of Asha Silicon Valley, a nonprofit committed to education for children in emerging countries. Author of the book 'The Dark Secret of the Silicon Valley', Raj is an investor in blockchain and cryptocurrency companies and an active member of the philanthropic community.
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COLEEN F, Hashcash Digest, +14159662907, [email protected]
SOURCE Hashcash Digest
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