401(k) retirement savings can be invested in crypto! The U.S. Department of Labor proposes a landmark rule draft

The U.S. Department of Labor submitted a proposed rule on March 31, aiming to make it easier for 401(k) retirement plans to include alternative assets such as cryptocurrencies, private equity, and real estate. This proposal directly echoes an executive order signed by President Trump in August last year, which instructed the Department of Labor to work jointly with the U.S. Securities and Exchange Commission (SEC) to expand investment channels for alternative assets within 401(k) plans.

Core Changes in the Department of Labor’s Proposal: A Policy Shift to Allow Retirement Funds to Include Alternative Assets

(Source: Federal Register)

The core of this proposed rule is a structural change in how retirement plans are set up. For years, most 401(k) retirement plans have primarily targeted stocks and bonds, and even when considering adding alternative assets, they have faced substantial regulatory hurdles. If the new rule is approved, it will allow plan providers to add digital tokens (including crypto assets such as Bitcoin) and private-market funds that are not traded on public exchanges.

In a statement, Secretary of Labor Lori Chavez-DeRemer said, “This proposed rule will show how the various plans can consider products that better reflect today’s investment environment.”

Key Timeline for Crypto Policy Reform of 401(k) Retirement Funds

May 2025: The Department of Labor withdrew prior guidance that urged fiduciaries to take an “extremely cautious” approach before including cryptocurrency

August 2025: President Trump signed an executive order requiring digital assets to be treated on par with other investment options

March 31, 2026: The Department of Labor formally submitted a proposed rule allowing 401(k) plans to more easily include alternative assets such as cryptocurrencies

Controversy Emerges: The Dilemma Between Diversification Support and Protecting Working-Class People

Supporters argue that allowing 401(k) retirement funds to access a broader range of asset classes can improve portfolio diversification and make retirement plans better reflect the real structure of today’s investment markets, rather than being limited to traditional stock-and-bond allocations. From the standpoint of economies of scale, if a large company with tens of thousands of employees allocates 1% of its 401(k) investment portfolio to Bitcoin, it would mean that hundreds of millions of dollars would flow into crypto funds or token markets, creating a structural increase in capital for the entire industry.

Opponents are equally clear. Senator Elizabeth Warren, in a statement, criticized that cracks have appeared in the private credit market, that private equity returns have fallen to the lowest level in 16 years, and that cryptocurrency prices have also continued to decline—at this moment, pushing for reform is questionable. She warned that the regulation could cause losses for working-class people while allowing large financial institutions to profit. She said bluntly, “But President Trump has decided it’s time to stuff all these high-risk assets into Americans’ 401(k) retirement accounts.”

At present, the proposed rule remains in the public comment phase, and its final form and approval timeline have not yet been determined.

Frequently Asked Questions

What is a 401(k) retirement plan, and why is this reform drawing attention from the crypto market?

A 401(k) is the United States’ primary employer-sponsored retirement savings account, with total assets held amounting to trillions of dollars. Because of its massive capital base, even a small share of allocation flowing into crypto assets could have a significant impact on the crypto market. It is one of the important policy channels that would bring institutional capital into the crypto market.

If the Department of Labor’s new rule is approved, will retirement plan holders be required to invest in cryptocurrencies?

No. The new rule allows plan providers to “add” alternative asset options, but it does not require every 401(k) plan to include cryptocurrencies. The final investment decisions depend on each company’s plan design and each employee’s individual asset allocation choices.

How large could the potential impact on the crypto market’s inflow of funds be from this reform?

U.S. 401(k) plans have total assets worth trillions of dollars. Even if only 1% flows into crypto assets, the amount could reach hundreds of billions of dollars. The crypto market’s relatively smaller size means that this scale of inflow of institutional capital could have profound and lasting effects on market structure.