Labor Department Rescinds Biden-Era Crypto 401(k) Guidance

The US Labor Department has officially rescinded guidance issued during the Biden administration that limited the inclusion of cryptocurrency in 401(k) retirement plans. On May 28, the Labor Department revoked a 2022 guidance that had urged fiduciaries to be “extremely cautious” when considering cryptocurrency for 401(k) retirement plans. The move could give asset managers more flexibility to include digital assets in retirement investment options.

The government agency removed the guidance asserting that it represented a departure from the department’s “historically neutral, principled-based approach to fiduciary investment decisions.” The Labor Department under Biden criticized the practice of marketing cryptocurrencies to 401(k) participants. At the time, the agency claimed cryptocurrencies posed “significant risks and challenges” to participants’ retirement accounts due to their “speculative and volatile” nature and “valuation concerns,” among other reasons.

Secretary of Labor Lori Chavez-DeRemer stated that the Biden administration's guidance was an overreach, and the current administration is rolling back this interference to allow investment decisions to be made by fiduciaries rather than bureaucrats. The new guidance from the Trump administration rescinds the previous compliance direction, effectively adopting a "neutral stance" on the inclusion of cryptocurrency in 401(k) investment menus. This move does not endorse or disapprove of including cryptocurrency in investment options but rather shifts the decision-making power back to plan fiduciaries.

The Trump administration has shown a pro-crypto stance, with President Trump's businesses expanding into the crypto space. This latest move aligns with the administration's broader embrace of cryptocurrencies. The rescission of the 2022 guidance is a notable shift in policy, as it removes the previous administration's cautionary stance on cryptocurrency investments in 401(k) plans. This change relieves plan sponsors of the burden of exercising "extreme care" when considering crypto investments, allowing them to make decisions based on their own assessments of risk and potential returns. The new guidance reaffirms the Labor Department's commitment to a neutral stance, ensuring that investment decisions are made by fiduciaries who are best positioned to evaluate the risks and benefits for their plan participants.