Financial Sector Removes Cryptocurrency Restrictions on 401(k) Plans, Granting Greater Authority to Fiduciaries
The U.S. Department of Labor (DOL) has announced the rescission of its 2022 guidance on cryptocurrency investments in 401(k) retirement plans, marking a significant shift in the federal stance on digital assets in retirement portfolios.
The 2022 guidance, which urged fiduciaries to exercise "extreme care" before adding cryptocurrencies due to concerns like fraud, volatility, and legal uncertainty, has been rescinded. The DOL's decision declares that the "extreme care" standard was not grounded in ERISA (Employee Retirement Income Security Act) fiduciary principles and instead returns to a more traditional "facts and circumstances" evaluation standard that applies equally to crypto and other asset types.
The new Compliance Assistance Release No. 2025-01 removes the presumption of heightened scrutiny against cryptocurrency and makes it clear that fiduciary decisions should be made by plan fiduciaries based on prudent, context-specific evaluations, not by prescriptive government directives. The DOL neither endorses nor disapproves of including crypto but emphasizes that fiduciaries must assess risks and suitability in line with ERISA’s standard duties of prudence and loyalty.
This policy shift from cautionary restriction toward a neutral, principle-based framework gives fiduciaries more discretion to consider cryptocurrencies as part of retirement plan investment menus under ERISA’s ordinary fiduciary standards. Final, updated fiduciary guidance on alternative assets, including crypto, is anticipated by early 2026.
U.S. Secretary of Labor Lori Chavez-DeRemer stated that the department is rolling back this overreach and making it clear that investment decisions should be made by fiduciaries, not D.C. bureaucrats. The decision to rescind the 2022 guidance has been welcomed by some lawmakers and industry stakeholders, who viewed the previous guidance as regulatory overreach and a potential barrier to innovation in retirement planning.
The DOL's concerns about cryptocurrencies in 401(k) retirement plans included significant risks and challenges, such as extreme price volatility, lack of clear valuation standards, and the evolving regulatory environment. However, critics said the tone of the previous guidance clashed with the neutral, principles-based framework traditionally upheld under the ERISA.
As digital finance continues to evolve, both regulators and retirement plan providers may face growing pressure to strike a balance between innovation and investor protection, without prematurely closing the door on new investment opportunities. The rescission of the 2022 guidance is a step towards this balance, providing a more flexible framework for fiduciaries to consider cryptocurrencies in retirement plans.
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