Donald Trump seemed to forge ahead on his promise to be the “first crypto president” with a flurry of cryptocurrency-related activities in recent months. He hosted a private dinner for investors in his meme coin, $TRUMP, in May, and pardoned three co-founders and a former employee of the crypto exchange BitMEX, who previously pled guilty to violating the Bank Secrecy Act, in March.
One decision that the administration rolled out with less fanfare, but is nevertheless relevant to HR professionals, was a May 28 announcement that the Department of Labor rescinded Biden-era guidance cautioning retirement plan sponsors against including cryptocurrency investment options in their retirement plans.
In a press release explaining the decision, Labor Secretary Lori Chavez-DeRemer called the 2022 guidance an “overreach,” and said the administration hoped to send the message that “investment decisions should be made by fiduciaries, not DC bureaucrats.”
The potential presence of crypto in 401(k) accounts is part of a broader shift to include alternative investments, such as private equity, in retirement plans. But just because the administration rescinded this guidance doesn’t mean employers should embrace cryptocurrency for their workers’ retirement benefits, one expert told HR Brew.
Crypto in the retirement space. In March 2022, the Department of Labor issued guidance cautioning retirement plan fiduciaries, such as employers, “to exercise extreme care” before giving workers the option to invest in crypto assets as part of their 401(k) plan.
The guidance, which was later dropped by the Trump administration, cited a number of “risks and challenges” such investments could pose to participants’ retirement accounts, including their “speculative” and “volatile” nature, plus the ability to make informed decisions when investing in cryptocurrency. Shortly after this guidance was issued, the provider Fidelity nonetheless rolled out a product that allows employers to give their employees the option to invest in the digital currency Bitcoin through their 401(k)s.
It appears incorporating cryptocurrency into retirement benefits isn’t currently a widespread practice. As of 2024, just 69 crypto asset investment options were available to 401(k) participants, according to the Government Accountability Office (GAO). Still, the GAO determined the DOL wasn’t comprehensively tracking the presence of crypto assets in 401(k) accounts—fiduciaries don’t have to disclose this information to the government, for example, if a plan has fewer than 100 participants.
Hype v. reality. ForUsAll, a 401(k) product that gives workers the option to invest part of their retirement savings in select cryptocurrencies, has already begun to see “a significant uptick” in plan sponsors exploring this option following the rescinding of the Biden-era guidance, according to its CEO, David Ramirez. The startup unsuccessfully sued the Biden administration for what it claimed was regulatory overreach, alleging it lost business as a result of the guidance.
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The fact that the value of Bitcoin rose more than 200% from 2022 represents “a staggering opportunity cost that has been borne by American savers,” Ramirez said. He noted these investments are popular with both consumers and institutional investors such as BlackRock and Franklin Templeton, which have worked to make digital assets available to clients in recent years.
The possibility that cryptocurrency will become more prevalent in workers’ retirement accounts has some experts worried, though. Rescinding the Biden-era guidance was “a step in the wrong direction,” said Alicia Munnell, senior advisor with Boston College’s Center for Retirement Research (CRR).
While the DOL simply said it aimed to take its thumb off the scale when it comes to cryptocurrency options in 401(k) plans, Munnell said the decision could also send “a signal of approval…and I’m concerned that that signal of approval will encourage people to introduce a Bitcoin option in their plan.”
Munnell’s primary issue with investment options like cryptocurrency comes down to the challenges participants may face understanding them, she said. Most US adults (68%) report that they don’t understand cryptocurrency, according to an April 2024 survey from The Harris Poll.
While a typical 401(k) portfolio with investments in stocks and bonds does have some volatility, crypto assets that are available to invest in 401(k) plans have “uniquely high volatility,” the GAO said in its report. From 2021 to 2023, volatility for five crypto assets available for investment in 401(k) plans was four-to-12 times greater than that of the S&P 500, a GAO analysis found.
Cryptocurrencies aren’t the first non-traditional investments to gain a foothold in the retirement space. Over the past 25 years, state and local pension plans have started investing in alternative assets like private equity and real estate, Munnell noted. CRR research has found, though, that the return on such investments is not as strong as a simple portfolio tied to stocks and bonds.
This trend may well extend to the private sector in the coming years as a result of the Trump administration’s priorities. Officials are said to be considering a directive that would make it easier for retirement plan providers to offer private equity investments in 401(k) plans.