Crypto Doesn’t Belong In Retirement Plans – Image for illustrative purposes only (Image credits: Pexels)
President Donald Trump signed an executive order in August 2025 that sought to broaden access to alternative investments, including digital assets, within 401(k) and other defined-contribution retirement plans.[1] The directive instructed the Department of Labor to review its guidance on fiduciary duties under the Employee Retirement Income Security Act, or ERISA, and propose measures like safe harbors to facilitate such options. Despite these efforts, cryptocurrency continues to clash with the law’s core requirements for prudent investing, leaving many fiduciaries wary of exposure.
Trump’s Push to Include Alternative Assets
The executive order, titled “Democratizing Access to Alternative Assets for 401(k) Investors,” highlighted how institutional investors and public pension plans often allocate to private equity, real estate, commodities, and digital assets for diversification and returns.[1] It criticized prior regulatory guidance and litigation as barriers that limited everyday workers’ opportunities compared to the wealthy. Within 180 days, the Labor Secretary was tasked with reexamining ERISA-related rules, including potential rescission of a 2021 private equity statement, and clarifying processes for fiduciaries.
The Department of Labor responded by rescinding its 2022 compliance release in May 2025, which had urged “extreme care” before adding cryptocurrency to plan menus.[2] A proposed rule followed in March 2026, outlining process-based criteria for evaluating alternatives like performance, fees, liquidity, and valuation to offer fiduciaries flexibility without endorsing specific assets.[3] Officials emphasized neutrality, stating the department would no longer pick winners or losers among investment classes.
ERISA’s Strict Fiduciary Demands
ERISA mandates that plan fiduciaries act solely in participants’ interests, exercising prudence as any expert would when selecting investments.[4] This duty encompasses diversification to minimize risk of large losses, loyalty without self-dealing, and ongoing monitoring. Courts hold fiduciaries liable for breaches that harm retirement savings, often through lawsuits challenging risky menu additions.
Guidance historically stressed context-specific evaluations, weighing factors like volatility, liquidity, and manager expertise. The law does not prohibit alternatives outright but demands rigorous vetting, especially for assets diverging from traditional stocks and bonds prevalent in most 401(k) lineups. Fiduciaries must balance potential higher returns against elevated expenses and uncertainties.
Key ERISA Prudence Factors for Any Investment:
- Projected returns versus risk
- Liquidity and ease of valuation
- Fees and costs relative to benefits
- Diversification within the portfolio
- Manager track record and security measures
Cryptocurrency’s Persistent Challenges
Digital assets present unique hurdles that strain ERISA compliance. Extreme price swings, often driven by speculation rather than fundamentals, undermine the stability retirement plans demand.[5] Valuing cryptocurrencies proves complex amid varying exchange rates, limited benchmarks, and custody issues across platforms.
Security risks loom large, including hacks, fraud, and theft, which have plagued the sector. Liquidity varies by asset – major coins like Bitcoin trade more fluidly than niche tokens – yet rapid market shifts can trap funds when participants need access. Regulatory evolution adds uncertainty, as frameworks for stablecoins and others remain incomplete.[4]
Even post-rescission, fiduciaries face demands to document thorough due diligence, often requiring specialized advisors. Critics note that many alternatives, including crypto, carry high fees that erode net gains, questioning their fit for long-term savings.
Protecting Savers Amid the Debate
While the executive order and DOL actions aim to empower choice, evidence suggests alternatives rarely enhance risk-adjusted returns for typical 401(k) participants after costs.[4] Pension funds and institutions, with greater resources, have scaled back some exposures amid doubts over inflated performance claims.
Few plans have adopted crypto options, reflecting fiduciary caution rooted in ERISA’s safeguards. Plan sponsors prioritize avoiding litigation over speculative upside. As debates continue, retirement security hinges on measured decisions that favor proven paths over high-stakes gambles.