Trump Administration Relaxes Regulations for Crypto Investments in 401(k) Plans
Published: May 28, 2025
Updated: May 28, 2025
By: Greg Iacurci
In a significant regulatory shift, the Trump administration announced on Wednesday the rescission of guidance established under the Biden administration that cautioned employers against including cryptocurrencies and related digital assets—such as Bitcoin, NFTs, and meme coins—in 401(k) retirement plans. This move aims to ease restrictions that had been placed to safeguard investors’ retirement savings from the volatility and risks associated with digital assets.
Background on Prior Guidance
The previous guidance, released by the Department of Labor in 2022, urged employers to exercise "extreme care" when considering the inclusion of cryptocurrencies in their retirement savings plans. The Biden-era officials highlighted the considerable risks of fraud, theft, and potential loss that are often associated with digital currencies. Their advice stemmed from the belief that cryptocurrencies posed a unique threat to the financial stability of investors’ retirement savings.
Trump Administration’s Position
The Trump administration’s Department of Labor has fully withdrawn the earlier recommendations, asserting that the concept of "extreme care" was not part of the Employee Retirement Income Security Act (ERISA). In a compliance assistance bulletin, the agency clarified its stance, stating that it is "neither endorsing, nor disapproving of" the addition of cryptocurrencies to 401(k) plans. Instead, the department aims to treat cryptocurrencies and various digital assets with the same impartiality as other investment types, stating that the previous guidance did not accurately reflect the legal frames of ERISA.
Knut Rostad, president of the Institute for the Fiduciary Standard and an advocate for investor protections, criticized the decision, calling it a “big mistake.” He argued that the removal of regulatory caution sends a misleading signal to employers and investors while noting that cryptocurrencies do not belong within a 401(k) framework.
Ramifications for 401(k) Investors
This shift paves the way for employers who are supportive of cryptocurrency to include digital assets in their 401(k) investment options without fear of regulatory repercussions. Philip Chao, a certified financial planner and founder of Experiential Wealth, suggested that this could be interpreted as an invitation for companies to explore crypto investments more freely. However, he cautioned that fiduciary responsibilities under ERISA still require employers to prioritize the best interest of their employees, meaning that there remains a risk of legal consequences if those investments do not perform well.
"There’s a lot of uncertainty surrounding crypto," Chao stated. "It may be treated like any other asset now, but the potential for significant loss still exists."
Previous Concerns and Market Impacts
Notably, the timing of this regulatory change coincides with Trump’s recent foray into the cryptocurrency market, as he launched a meme coin, $TRUMP, which has reportedly enhanced his net worth significantly. Critics and legislators have expressed concerns regarding this potential conflict of interest, with some calling for an ethics investigation.
During the downturn in cryptocurrency markets in late 2022, dubbed the "Crypto Winter," significant losses were experienced by many investors due to the failures of various crypto-centered entities, including the collapse of major platforms like FTX. Some financial advocates argue that the previous guidance likely prevented wider losses for 401(k) investors during that tumultuous period, underscoring the risks associated with introducing such volatile assets into retirement plans.
Conclusion
As the landscape for retirement investing continues to evolve, the Trump administration’s latest decision reflects a significant shift toward a more open approach regarding cryptocurrency in 401(k) plans. However, as employers navigate these changes, they must also recognize and uphold their fiduciary responsibilities while considering the implications of digital asset investments on their employees’ financial futures.
As this situation continues to develop, industry experts will be watching closely to understand its long-term effects on the retirement savings of American workers.
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