Retirement plans open to crypto

[UNITED STATES] The Trump administration has eliminated a key regulatory barrier that previously discouraged employers from offering cryptocurrency and digital assets—such as NFTs and meme coins—within 401(k) retirement plans. This decision rescinds guidance issued by the Biden-era Labor Department in 2022, which had urged employers to exercise “extreme care” before including crypto options in retirement accounts, citing risks like fraud, theft, and loss. The Trump Labor Department now maintains a neutral stance, stating it is “neither endorsing, nor disapproving of” crypto in 401(k)s, and emphasizes that investment decisions should be made by plan fiduciaries rather than federal regulators.

Critics argue that removing the cautionary guidance sends the wrong message, potentially exposing retirement savers to greater risk. Advocacy groups and financial experts warn that crypto’s volatility and lack of regulation make it a questionable fit for retirement portfolios, especially given the fiduciary duty plan sponsors have to act in the best interests of participants. Meanwhile, supporters of the move see it as a step toward innovation and expanded choice, aligning with the administration’s broader pro-crypto agenda, which includes President Trump’s own foray into meme coins and ambitions to position the U.S. as a global crypto leader.

Despite the policy shift, legal obligations for fiduciaries remain unchanged: employers must still act prudently when selecting investment options. Some experts suggest that the practical impact may be limited, as many plan sponsors are likely to remain cautious about offering crypto due to ongoing concerns about volatility, regulatory uncertainty, and potential liability.

Implications

For businesses, this policy change means greater flexibility in designing 401(k) investment menus, potentially opening the door for plan sponsors to offer a wider array of digital assets. However, this also introduces new complexities and risks. Employers must still navigate their fiduciary responsibilities under ERISA, meaning they could face legal challenges if crypto investments in retirement plans fail and participants suffer losses. The decision could also increase administrative burdens, as plan sponsors may need to develop new policies, disclosures, and monitoring procedures for crypto investments.

For consumers, the shift could mean more investment options within their retirement accounts, including access to high-growth (and high-risk) digital assets. While this may appeal to those seeking diversification or speculative gains, it also raises the risk of significant losses, particularly for individuals who lack the knowledge or experience to evaluate crypto investments critically. The move could also create confusion, as the regulatory landscape for digital assets remains unsettled and protections for investors are limited compared to traditional securities.

From a public policy perspective, the reversal signals a broader shift toward a more permissive approach to crypto regulation under the current administration. It reflects a desire to foster innovation and position the U.S. as a leader in digital finance, but it also raises questions about whether sufficient safeguards are in place to protect retirement savers. The lack of clear regulatory frameworks and ongoing concerns about fraud and volatility suggest that policymakers will need to monitor the impact of this change closely.

What We Think

The Trump administration’s decision to rescind Biden-era guidance on cryptocurrency in 401(k)s is a significant policy shift, but its practical impact remains uncertain. On one hand, it removes a perceived obstacle for employers seeking to innovate and offer more diverse investment options. On the other, it does not alter the fundamental fiduciary duties that plan sponsors owe to participants—meaning employers must still act prudently and in the best interests of retirement savers.

The move is likely to be welcomed by crypto advocates and those who favor market-driven solutions over regulatory intervention. However, it also risks exposing less sophisticated investors to volatile and poorly understood assets at a time when the crypto market is still maturing and regulatory protections are minimal. “Crypto is such a new thing and there’s no regulation or protection, even a reasonable understanding of it. And there still isn’t enough,” as one expert noted.

Ultimately, while the policy change cracks open the door to crypto in retirement plans, it does not guarantee widespread adoption. Many employers may remain cautious, mindful of both legal risks and the potential for backlash if crypto investments go awry. For now, the onus is on plan fiduciaries to carefully weigh the benefits and risks—and on regulators to ensure that investor protections keep pace with innovation. The debate over crypto’s role in retirement savings is far from settled, and this latest development is just one chapter in an ongoing story.