Crypto exchange operator Coinbase has partnered with ForUsAll, a 401(k) advisor, to offer crypto investments for retirement accounts.
The partnership will allow ForUsAll clients, i.e. small to medium-sized employers, to offer their employees an option to invest up to 5% of their portfolio into cryptocurrencies such as bitcoin and ether. Coinbase Institutional will manage trading and custody of those coins.
This is a "first of its kind" initiative, according to ForUsAll, which manages over $1.7 billion worth of assets for over 70,000 employees. That figure, however, represents only a tiny portion of the $22 trillion retirement account market.
The initiative comes at a time when crypto's mainstream adoption is growing. Earlier this week, El Salvador became the first country to adopt bitcoin as legal lender. Several megabanks, including Goldman Sachs and Morgan Stanley, have also started offering crypto services to their clients in recent months.
Currently, no 401(k) providers, including giants Charles Schwab and Fidelity, allow direct crypto purchases in retirement accounts. Although they do offer investments in Grayscale investment products that are tied to cryptocurrencies such as bitcoin.
A higher level of risk
According to ForUsAll CIO David Ramirez, allocating a small portion of a portfolio into cryptocurrency can help improve portfolio diversification and expected returns.
Still, one needs to be mindful of volatility. Bitcoin, for instance, has lost around 40% of its value in just two months after hitting a record high of around $64,000 in mid-April. Bitcoin is currently trading at about $37,800.
Keeping in mind crypto's gyrations, ForUsAll would automatically alert participants of its crypto 401(k) plans, called Alt 401(k), when their allocations exceed 5% of their portfolio. When the portfolio balance in crypto exceeds 5%, participants won't be allowed to put more money in crypto.
ForUsAll will begin offering Alt 401(k) plans from July and charge 0.5% in transaction fees and 0.5% in asset management fees.
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