US Labor Department Reverses 2022 Crypto Guidance for 401(k) Plans UK FCA Opens Public Consultation on Stablecoin and Crypto Custody Rules

The United States and the United Kingdom have taken significant steps this week to formalize the role of cryptocurrencies in traditional finance. In the United States, the Labor Department has officially reversed its 2022 guidance that discouraged the inclusion of crypto assets in 401(k) retirement plans. This move restores fiduciary discretion for plan managers, allowing them to assess whether digital assets are suitable for long-term retirement strategies. The reversal is seen as a return to a "principled-based" framework, where plan managers, rather than federal regulators, determine the merits and risks of cryptocurrencies based on the unique needs of plan participants.

This change effectively grants retirement plan providers more discretion to include Bitcoin, Ethereum, and other digital assets in 401(k) offerings. The American Banking Association applauded the rollback, arguing that the prior administration’s action amounted to de facto rulemaking without transparency or due process. The Labor Department's updated position does not constitute a blanket endorsement of cryptocurrencies in 401(k) plans but shifts the responsibility and liability back to fiduciaries, who must still uphold their duty to act in the best interests of plan participants. Industry analysts expect many asset managers to proceed cautiously, balancing client demand with evolving legal and regulatory standards.

Meanwhile, in the United Kingdom, the Financial Conduct Authority (FCA) has opened a public consultation on proposed rules for stablecoins and crypto custody. The initiative aims to support innovation while reinforcing market trust and consumer protection. The FCA's proposals reflect extensive input from roundtable discussions, industry consultations, and the broader global movement toward regulated digital assets. The consultation will remain open in the coming weeks, inviting perspectives from both industry stakeholders and the general public.

The FCA's core objectives include ensuring that regulated stablecoins maintain their promised peg to a fiat currency, such as the British pound or US dollar. Under the proposed rules, issuers of qualifying stablecoins would be legally obligated to honor 1:1 redemption rights at par value, regardless of the fluctuating value of backing asset portfolios. To reinforce consumer protections, stablecoin issuers would be required to appoint independent, third-party custodians to safeguard their reserve assets and disclose clear and accessible information about the structure and quality of the asset backing.

This push for transparency comes amid growing global scrutiny over stablecoin reserve practices, especially after the collapse of poorly backed stablecoins like TerraUSD in 2022 triggered industry-wide contagion. The FCA is working in tandem with the Bank of England to construct a comprehensive framework for stablecoins, especially those that could operate at systemic scale. The Bank of England will release a complementary consultation paper later this year.

The FCA has also introduced sweeping new requirements for firms providing crypto custody services. These proposals are designed to bolster investor confidence by ensuring that crypto assets are held securely and remain readily accessible at all times. Custodians will be expected to follow strict internal controls, implement high-security measures, and maintain transparent procedures for asset segregation, incident reporting, and recovery mechanisms. The proposed rules also seek to reduce both the likelihood and impact of institutional failure, in direct response to previous collapses such as Celsius, BlockFi, and FTX, where customers faced prolonged access delays or complete loss of assets.

In summary, the United States and the United Kingdom have taken significant steps to advance crypto regulations for retirement and custody. The US Labor Department's reversal of its 2022 guidance on crypto assets in 401(k) plans and the UK FCA's public consultation on stablecoins and crypto custody reflect a broader trend toward formalizing the role of cryptocurrencies in traditional finance. These developments are expected to support innovation while reinforcing market trust and consumer protection, potentially paving the way for broader mainstream adoption of digital assets in retirement portfolios and financial services.