Labor Department Reverses Crypto Warning for Retirement Savings

The U.S. Department of Labor has reversed its previous stance on including crypto investments in retirement savings, stating that issuing warnings about the risks of digital assets did not maintain appropriate neutrality. The new compliance directive, issued on Wednesday, clarifies that the department should not single out assets for warnings or praise, aligning with recent actions from the administration of President Donald Trump to remove barriers to digital assets investment. Trump has expressed his ambition to be the "crypto president."

Secretary of Labor Lori Chavez-DeRemer stated, “The Biden administration’s Department of Labor made a choice to put their thumb on the scale. We’re rolling back this overreach and making it clear that investment decisions should be made by fiduciaries, not D.C. bureaucrats.” The department under President Joe Biden had previously advised 401(k) plan decision-makers that crypto may be too risky for retirement planning, citing significant risks of fraud, theft, and loss. This warning came before several high-profile failures in the crypto industry, including the collapse of Celsius Network, Voyager Digital, and FTX.

Despite the initial warnings, crypto assets have since recovered, with an investment made on the day of the warning now showing a considerable gain. In 2023, a California-based 401(k) provider sued the Department of Labor, alleging that the agency did not follow proper procedures in issuing the guidance. Under Trump, several agencies, including the Securities and Exchange Commission and the Commodity Futures Trading Commission, have reconsidered their crypto stance and begun reversing previous policies. Chavez-DeRemer, who received significant backing from a crypto super PAC, was appointed by Trump as the Labor secretary.

As the government shifts its approach to crypto, Trump and his family have personally embraced the industry for their own business interests. The president recently attended a dinner for top investors in his own memecoin, and Trump Media and World Liberty Financial are pursuing significant crypto moves. Trump's business ties have been a central issue in U.S. legislation aimed at establishing guardrails for stablecoin issuers. The Department of Labor's reversal reflects a broader trend within the administration to support digital assets, potentially paving the way for greater integration of crypto into traditional financial systems.