The U.S. Department of Labor proposes to allow 401(k) retirement plans to invest in cryptocurrencies—from the “extreme caution” of 2022 to the safe harbor rules of 2026—a regulatory standoff over $10 trillion in retirement savings. This article is sourced from LuLu Does Not Eat Grass, translated and compiled by Dongqu.
(Background recap: Did Trump’s “White House review” pave the way to let 401(k) retirement funds buy cryptocurrency, with Bitcoin being pumped by $12 trillion in capital preparations?)
(Background addition: SEC Chair Atkins: The time for cryptocurrencies to be included in 401(k) retirement accounts has come)
Table of Contents
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- From “Extreme Caution” to Safe Harbor
- A Four-Year Standoff
- Trump’s Executive Order
- The $10 Trillion Gate
- The Risk of a Ten-Month Pregnancy
- The Real Stakes
$14.2 trillion. This is the total asset size of defined-contribution retirement plans in the U.S. (as measured through the end of 2025). Now, the managers of this money have, for the first time, been officially told: you may consider putting Bitcoin in.
On March 30, the U.S. Department of Labor (DOL) issued a proposed rule that provides a “process-based safe harbor” for 401(k) plan fiduciaries. Put simply, if you evaluate the risks by following the required procedures, you won’t get sued for adding cryptocurrencies to the investment menu.
This sounds like a technical tweak to regulations. But its significance goes far beyond the surface.
Because just four years earlier, the same Department of Labor, about the same matter, said the exact opposite.
From “Extreme Caution” to Safe Harbor
Let’s go back first to March 10, 2022.
That day, the DOL under the Biden administration issued a compliance assistance bulletin. Its title was unremarkable, but the content landed like a heavy punch. The bulletin’s core message was only one sentence: any fiduciary considering offering a cryptocurrency option in a 401(k) plan should “exercise extreme caution.”
This is not merely advice—it’s a threat. The bulletin clearly stated that plan fiduciaries offering cryptocurrency investment options “should expect to be questioned” about how they fulfilled their duties of prudence and loyalty in the face of these risks.
In other words: If you dare to let retirement funds touch Bitcoin, we’ll come after you.
The DOL listed five major risks: extreme volatility, valuation challenges, custody and recordkeeping vulnerabilities, fraud and theft risk, and a regulatory environment that is constantly changing. Each point led to the same conclusion: cryptocurrencies are not suitable for retirement plans.
This bulletin’s context matters. Just a month earlier, in April 2022, Fidelity—one of the largest retirement plan providers in the United States—announced it would allow 401(k) participants to invest up to 20% of their account balance in Bitcoin. This was the first time Wall Street formally opened the door to bringing Bitcoin into retirement accounts.
The DOL’s response was almost immediate. Two Democratic senators, Elizabeth Warren and Tina Smith, promptly sent letters to Fidelity, questioning its decision.
But not everyone went along.
A Four-Year Standoff
On June 2, 2022, ForUsAll, a California retirement tech company, sued the Department of Labor. ForUsAll is a small company that provides a crypto 401(k) solution, allowing participants to invest up to 5% of their account balance in cryptocurrencies. Its argument was straightforward: the Department of Labor lacked legal authority to issue this kind of guidance, and the process had no public comment period, violating the Administrative Procedure Act.
At the core, the lawsuit was a clash between two worldviews.
On one side was the regulator’s logic: retirement funds are the most important savings for ordinary Americans, and they can’t be exposed to highly speculative assets. In the U.S., more than 70 million people rely on 401(k) plans for retirement, and 42% of full-time workers don’t even have a pathway to a retirement plan. For these people, every dollar in a retirement account can’t be wasted.
On the other side was the innovators’ logic: the fiduciary responsibility standards of ERISA—the Employee Retirement Income Security Act—should apply equally to all asset classes. Cryptocurrencies shouldn’t be singled out for discrimination. And banning an option itself is “imprudent,” because diversification is the correct way to reduce risk.
This debate hung in the balance between 2022 and 2024. Then the political winds changed.
Trump’s Executive Order
On August 7, 2025, President Trump signed an executive order titled “Democratizing 401(k) Investors’ Access to Alternative Assets.” The document did three things:
First, it instructed the Secretary of Labor, Lori Chavez-DeRemer, to reexamine all guidance from the department regarding retirement account investment options.
Second, it required the Department of Labor to collaborate with agencies such as the Treasury Department and the SEC to develop companion policies.
Third, it made the position explicit: alternative assets such as cryptocurrencies, private equity, and real estate should all have the chance to enter the 401(k) investment lineup.
On May 28, 2025, the Department of Labor formally rescinded the 2022 “extreme caution” guidance. The rescission bulletin’s wording (Release No. 2025-01) was telling: the 2022 guidance “went beyond ERISA’s general fiduciary principles,” and what replaced it was a “facts and circumstances” standard—fiduciaries evaluating cryptocurrencies should do so the same way they evaluate any other investment.
Translated into plain terms: we no longer think cryptocurrencies are special dangerous goods. You judge it yourself—follow normal procedures.
From “extreme caution” to “facts and circumstances,” from threats of investigation to rescinding guidance—only three years. Then on March 30, 2026, the proposed rule pushed the entire matter to the finish line: a formal safe harbor framework.
The $10 Trillion Gate
What does this safe harbor framework mean?
Under the proposal, as long as 401(k) plan fiduciaries follow the required evaluation process—analyzing the investment’s risks and returns, considering the characteristics of plan participants, and evaluating the fee structure—they can include cryptocurrencies in the investment menu without worrying about being pursued by the Department of Labor afterward. The proposal is now entering a 60-day public comment period, after which it may be revised and ultimately released as a final rule.
The numbers show the scale of what’s at stake.
Total assets of U.S. defined-contribution retirement plans (including 401(k) and similar plans) are $14.2 trillion. Total retirement assets across the U.S. are $49.1 trillion. If you look only at 401(k) plans, even with just a 1% allocation flowing into Bitcoin, that’s more than $100 billion.
Industry consensus recommendations suggest a higher allocation. Bitwise’s financial advisor survey shows that most portfolio managers recommend a 2.5% to 3% allocation to Bitcoin. Fidelity allows up to 20%. ForUsAll’s cap is 5%. Even picking a conservative midpoint—2% to 5%—this implies potential capital inflows of hundreds of billions to trillions of dollars.
But here’s the key timing gap.
The Risk of a Ten-Month Pregnancy
A proposed rule is not the same as a final rule. After the 60-day comment period, the Department of Labor needs to absorb public input, revise the text, and conduct another review before issuing the final version. This process may take months, or even a year. And even if the rule is approved, plan sponsors (usually employers) still have the right to decide whether to add cryptocurrency options to their own plans—there’s no mandate.
A commonly overlooked fact is this: regulators opening the door doesn’t mean employers will walk through it.
Based on current data, about 10% of American adults who have retirement accounts hold some form of cryptocurrency. Among Millennials, the figure is 18%; among Gen Z, it’s 14%. But these numbers reflect individual behavior, not portfolio allocations at the plan level.
From the plan sponsor’s perspective, adding cryptocurrencies to the investment menu means additional compliance costs, education obligations, and potential litigation risk—even with a safe harbor in place.
More importantly, it’s a matter of timing. Bitcoin is currently priced at about $67,000, down roughly 38% from its historical high of about $108,000 at the end of 2024. The energy crisis triggered by the Iran war is hitting global markets, and WTI crude oil closed above $100 per barrel. The S&P 500 is experiencing its longest streak of consecutive declines since 2022.
Pushing retirement funds into crypto in this environment requires not only a regulatory green light, but also market confidence.
The Real Stakes
Back to the starting point of this story.
In 2022, the Department of Labor said “extreme caution,” which in essence meant: we don’t trust ordinary investors’ ability to assess the risks of cryptocurrencies.
In 2026, the Department of Labor said “safe harbor,” which in essence meant: we trust fiduciaries to make judgments by following the process.
For ordinary 401(k) participants, this means a new option—and a new risk—for people who deduct a few hundred dollars from their paychecks each month and are counting on having some savings when they retire at 65.
In finance, once the gate is opened, the direction of the water flow is no longer determined by the gate’s builders. The $14.2 trillion pool already has a new outlet. The next question is: how much water will flow through, and how many people will only realize they’re standing at the bottom of the pool when the water level drops.
