The cryptocurrency industry's recent troubles — the crumbling of FTX and BlockFi, the slide in crypto prices and a hostile regulatory environment — are unlikely to prevent financial-technology 401(k) plan providers from offering cryptocurrency in their 401(k) plans, several providers suggested.
"We haven't seen a diminution in overall demand and interest," said David Ramirez, the Menlo Park, Calif.-based CEO of ForUsAll Inc., referring to the company's new Alt401(k) cryptocurrency offering, which it launched in June.
On top of the 50 plan sponsors that have already turned on the cryptocurrency brokerage window in their 401(k) plans, Mr. Ramirez expects some 100 additional clients to go live with the offering in the next six to eight weeks.
Most of the 50 early adopters are technology, fintech and blockchain Web3 companies that were not surprised by the sharp decline in the crypto market because they had experienced multiple significant downturns before, most recently in 2018, 2020 and 2021, Mr. Ramirez said.
"Our crypto and technology clients understand these cycles," he said. "To date, we haven't seen significant concerns or questions from either plan sponsors or plan participants."
The plan sponsors that have rolled out the crypto window collectively have $65 million in their 401(k) plans with 15% of participants on average using the window, a rate of utilization that Mr. Ramirez says is in line with the company's expectations given the education, guidance and guardrails it put in place. The average allocation per participant to crypto is 3.7%, well within the company's 5% crypto cap.
Despite the recent blow to the crypto industry's reputation, Mr. Ramirez remains bullish on the future of digital currencies, citing rising interest in blockchain technology among financial institutions and central banks.
"Cryptocurrency is the predominant way to invest in blockchain technology, which we believe has the potential to be transformative," he said.
Mr. Ramirez pointed to the large and growing number of organizations already using blockchain technology, including Vanguard Group Inc., which he said has been using the technology for its index data for years.
"The power of blockchain to unlock so many new efficiencies in financial services is significant," Mr. Ramirez said.