Crypto may be coming to 401(k)s, but it’ll be a while before savers can jump in
The crypto market this week cheered as President Donald Trump signed an executive order meant to open retirement plans to alternative assets including cryptocurrencies. The move from the White House has the potential to be a game changer for the adoption of digital assets. It could help turn them into mainstays of the U.S. financial market by expanding access and encouraging longer-term investing in crypto. Bitcoin , which has been riding a big wave of institutional acceptance and adoption since last year’s debut of U.S. bitcoin ETFs , could one day become more established within financial services. It probably won’t happen soon based on the White House’s greenlight alone. It’s even more unlikely investors will be directing BONK , Pudgy Penguins or other meme coins to their retirement accounts. “On the surface, it’s exciting to see digital assets getting presidential-level attention,” said Doug Boneparth, certified financial planner and founder of Bone Fide Wealth. “It signals continued legitimization of the space and shows how far we’ve come since bitcoin was just an internet curiosity. But the reality is a lot more nuanced.” Employer adoption is key First of all, under the Employee Retirement Income Security Act of 1974 (better known as ERISA), major changes to investment menus require thoughtful guidance and buy-in from plan sponsors – especially if they involve volatile and still-maturing asset classes like crypto, Boneparth noted. For example, Fidelity in 2022 became the first retirement plan provider to give savers the option of putting bitcoin in their 401(k)s. However, employers must be willing to adopt the offering in the first place. That “came down to employers’ risk tolerance and fiduciary responsibility. That’s not changing overnight with an [executive order],” Boneparth said. Employers’ fiduciary duty requires them to comply with ERISA and to run the plan in the best interest of the participants and beneficiaries. Further, too many investment options can be a barrier to participation, said Preston Cherry, CFP and founder of Concurrent Financial Planning. While increased access to crypto may be a plus, “people become overwhelmed with the investment menu options” which leads to a “lack of participation,” he said. Even when there is education available on these investment options, employees have to elect to receive it — and those participation rates are typically low, Cherry added. Combine those considerations with high-risk assets, and employers’ fiduciary responsibility has to kick in. “What happens with all the other altcoins?” Cherry said, separating out bitcoin, ether and the Solana token. “There should be oversight on that from the investment committee or plan sponsor overseeing what digital currencies actually get accepted and should for sure be educating on it.” “There’s potential upside in digital currencies, but a lot of folks can’t understand 30%, 40%, 50% drawdowns – and it could be destructive,” he added. “I’m not saying don’t invest in crypto, but be crypto cautious.” It depends on recordkeepers and 401(k) plan providers The retirement market had $43 trillion in assets in the first quarter, almost $9 trillion of which was held in 401(k) plans, according to the Investment Company Institute. The crypto market cap is nearly $4 trillion today. The executive order is the latest in a series of efforts under the Trump administration to make the U.S. the “crypto capital of the world.” In July, he signed stablecoin legislation known as the GENIUS Act into the first official U.S. crypto law . The Securities and Exchange Commission recently debuted ” Project Crypto ,” an initiative to modernize securities regulations to allow for crypto-based trading. “The plan providers, the third-party providers, the recordkeepers, are going to decide the end result here, if they want to put crypto in or not,” said Tyrone Ross, CEO of registered investment advisor 401 Financial. “This is part of this administration’s goal to make crypto the epicenter of the world and to have it grow here,” he added. “They’re all-in, but the Fidelities of the world, the Schwabs, the MassMutuals, the Vanguards of the world – I don’t know if they’re just going to go, ‘OK, we’re going to do it.'” Boneparth echoed that the order is more “more symbolic than structural right now.” However, this shouldn’t diminish the significance of Washington’s blessing of the crypto industry. Further, an education opportunity has just opened up in the retirement sector. “As someone who believes in the long-term role of bitcoin in a diversified portfolio, I’m hopeful,” Boneparth said. “But as a fiduciary, I know our job is to help clients weigh the opportunity and the risk.” “If we do this right, the door opens a little wider to the future of retirement investing,” he said. “If we don’t? Well then, who knows what meme coin we’re going to see on a retirement plan statement.”
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