The U.S. Department of Labor has released a proposed rule that would give 401(k) fiduciaries a safe harbor when considering alternative investments, including funds that invest in cryptocurrencies and other digital assets.
Only 4% of defined contribution plans offered alternative investments last year, with just 0.1% of assets allocated to them, per data cited in the proposal.
“Retirement funds are the holy grail for bitcoin enthusiasts looking for new investors: oceans of cash, tax-advantaged,” Andrew M. Bailey, Senior Fellow at the Bitcoin Policy Institute, told Decrypt.
But retirement plans carry a built-in tension, Bailey noted.
“Their horizons—decades, not months or years, make them well-suited for long-term investment in new technologies,” he said. “Their approach to risk and tight regulations pulls them in the opposite direction.”
While risk aversion could “steer retirees away,” rule changes “that empower savers to make their own choices” would be welcome, he said.
Once the rules are settled, the harder question is whether savers will actually bite, Bailey opined.
The proposal places digital assets “on the same playing field” as other alternative investments, Joshua Chu, lawyer, lecturer, and co-chair of the Hong Kong Web3 Association, told Decrypt.
“If a fiduciary can document a robust process on fees, liquidity, valuation and complexity, they now have a clear safe harbor roadmap instead of a regulatory minefield,” he said.
With it, retirement savers can get “a taste of alternative-asset alpha without the plan sponsor hiding under the desk every time Bitcoin sneezes,” he added.
Still, fiduciaries would need to build “daily pricing, liquidity, and risk controls” for crypto inside 401(k) wrappers before any of it reaches a retiree's account, he added.
The proposal could put U.S. retirees ahead of most Asian savers in accessing regulated crypto exposure, Chu noted, citing how Hong Kong's pension system and China's trading ban still keep digital assets out of retirement accounts.
