Fidelity administered $2.7 trillion in 401(k) assets at the end of 2021. The Boston-based company said it would let employers add a bitcoin account to 401(k)s later this year, putting Bitcoin on the menu next to mutual fund holdings. stocks and bonds.

What’s in it for Fidelity? A bottom-of-the-envelope calculation shows it could bring in hundreds of millions of dollars in additional revenue, albeit likely many years down the line.

Fidelity says it will charge between 0.75% and 0.9% for the digital asset account, in addition to undisclosed transaction fees. The company says it will limit Bitcoin to 20% of a 401(k) balance.

Assuming a 1% to 5% allocation for investors, Fidelity could earn between $203 million and $1.2 billion in administrative fees on its Bitcoin accounts, not including transaction fees. Assuming that 10% of its $2.7 trillion in assets ends up being invested in Bitcoin, Fidelity could rake in over $2 billion in annual administrative fees.

Admittedly, 10% in Bitcoin may be unattainable, at least in the short term. Some crypto proponents say that an appropriate bitcoin allocation for an average retirement saver is between 1% and 5%. (Detractors, of course, say an allowance of zero is more reasonable.)

It’s unclear if even 1% of Fidelity’s 401(k) assets will enter crypto soon. While employers will have the option of adding a digital asset account, it is far from certain that many will choose this option, in part due to legal responsibilities.

“The main motive for sponsors is not to be sued,” said Ron Surz, a retired consulting veteran and head of Target Date Solutions. Bitcoin’s adoption in plans will likely depend on its performance over the next few years and the costs of owning the crypto, said Surz, who thinks it could take 10 to 20 years for the asset class to become a mainstream. significant portion of 401(k) assets.

One snag could be the Department of Labor, which may be about to crack down on 401(k)s that allow investors to hold crypto. In March, the department said employers offering crypto should expect to be questioned about how such a move fits in with their fiduciary duties. After Fidelity’s move, a senior DOL official doubled down, expressing serious concerns about the suitability of crypto as a retirement asset.

Congress isn’t likely to provide any clarity either. Sen. Tommy Tuberville (R-Ala.) said Thursday he is introducing legislation to prevent the DOL from banning Bitcoin or other assets in 401(k) plans. But such legislation faces long odds in the Democratic-controlled Senate, where lawmakers like Elizabeth Warren (D.-Mass.) have previously questioned Fidelity’s plan.

Employers may also fear being sued by investors for offering a volatile investment like Bitcoin, which could expose them to lawsuits for breach of fiduciary duty. A recent survey of plan sponsors found that only 2% said they would consider adding crypto to a 401(k) menu.

Still, Fidelity is playing the long game. Company officials said they only see the Bitcoin product as a start, aiming to expand into other digital assets.

Fidelity is also developing institutional trading and custody services for crypto. The company could thus capitalize both on the commercial side, via 401 (k) plans, and on its institutional side.

How much Bitcoin will bring to Fidelity is of course not known. The company could lose assets moving from its mutual funds to digital accounts, and product fees could drop as its assets grow and it faces new competition.

Change is also happening at an icy pace in 401(k). The DOL in 2006 issued new rules that made it much easier for companies to auto-enroll employees, for example. More than a decade later, only 62% of plans use this feature, according to the Plan Sponsor Council of America.

Still, if Fidelity were to earn even $500 million a year from Bitcoin – an average figure – it would be nothing to sniff at. Last year, Fidelity had total revenue of about $24 billion.

The company declined to comment on its potential revenue from Bitcoin.

If digital assets ever took over a good chunk of retirement portfolios, putting pressure on Fidelity’s fees in other products, a little Bitcoin could go a long way.

Email Joe Light at [email protected]