Regulators Open 401(k)s to Crypto Amid Volatility and Fiduciary Risks

Federal regulators and lawmakers are accelerating efforts to integrate cryptocurrency into 401(k) retirement plans, following a series of policy shifts and executive actions. President Donald Trump’s August 7 executive order, which permits alternative assets—including Bitcoin and private equity—into workplace retirement accounts, has triggered a regulatory overhaul involving the Department of Labor (DOL), Securities and Exchange Commission (SEC), and Treasury. The order mandates a 180-day review of fiduciary standards to facilitate the inclusion of digital assets, with compliance frameworks expected to be finalized by early 2026 401(k) savers could see new options, including bitcoin …^[1]. This move aligns with broader industry trends, as institutions like Michigan’s largest public pension plan already hold $74 million in Bitcoin and Ethereum ETFs, reflecting growing institutional confidence in crypto as a diversification tool 401(k) Crypto Rules 2025: Complete Guide for Plan Sponsors and ...^[2].

The regulatory shift marks a reversal from earlier caution. In 2022, the DOL issued guidance discouraging crypto investments in 401(k)s due to volatility and custodial risks. However, the 2025 rescission of that guidance introduced a “facts-and-circumstances” standard, granting fiduciaries discretion to evaluate alternative assets if due diligence is performed. This change is seen as pivotal for legitimizing crypto in retirement portfolios, particularly as Bitcoin’s price surged to an all-time high of $124,457 on August 14, coinciding with the executive order What experts say about adding crypto to retirement savings …^[3]. Proponents argue that Bitcoin’s scarcity and institutional adoption, such as Michigan’s 36.5 million dollar gain on its crypto holdings, demonstrate its potential as a store of value Bitcoin in 401(k)s | Trump Signs Executive Order^[4].

Critics, however, highlight significant risks. Alicia Munnell, senior adviser at the Center for Retirement Research, calls the inclusion of Bitcoin in 401(k)s a “terrible idea,” citing its volatility and lack of historical performance data. She notes that participants often misjudge the product’s speculative nature, and traditional retirement strategies rely on decades of market history to mitigate risk Report Highlights Risks and Oversight Challenges of Crypto in 401 …^[5]. Similarly, the Government Accountability Office (GAO) warns that a 20% allocation to Bitcoin could amplify portfolio swings compared to smaller allocations, while cybersecurity vulnerabilities and regulatory gaps pose additional challenges 3 Reasons Why Bitcoin in Your 401(k) Is Still a Terrible …^[6]. Fiduciaries face heightened liability risks, as legal experts caution that lawsuits could follow if participants suffer losses from poorly vetted crypto options.

Market reactions underscore both optimism and caution. Bitcoin’s price surged 99% in the past year, reaching $116,394 by September 2025, fueled in part by Trump’s executive order Bitcoin in 401(k)s Come With Serious Risks - Cointelegraph^[7]. Analysts like Ryan Rasmussen of Bitwise estimate that even a 10% allocation of the $8 trillion 401(k) market to Bitcoin could inject $800 billion into the crypto sector, potentially pushing prices above $155,000 How Will Bitcoin Impact 401(k) Plans? - OneSafe Blog^[8]. However, high fees—such as 0.95% for the ProShares Bitcoin Strategy ETF—raise concerns about eroding returns, particularly for traditional 401(k) plans with average fees of 0.26% Bitcoin to Join Gold on Central Bank Reserve Balance Sheets by …^[9]. Experts like Margaret Rosenfeld of Everstake advocate for updated regulatory frameworks, including clear benchmarks for liquidity and custody, to mitigate risks.

The debate reflects broader societal divides. While 10% of U.S. adults with retirement accounts already hold crypto, younger investors are more enthusiastic, with 18% of millennials and 14% of Gen Zers reporting holdings What experts say about adding crypto to retirement savings …^[10]. Advocates like Elizabeth Hansson of Stand with Crypto emphasize education and gradual adoption, noting that employers—especially those with tech-savvy workforces—may act swiftly once regulations are finalized. Conversely, traditionalists argue that retirement savings should prioritize stability over speculative gains, particularly for older participants with shorter time horizons Report Highlights Risks and Oversight Challenges of Crypto in 401 …^[11]. The DOL’s emphasis on “extreme care” in evaluating crypto options underscores the tension between innovation and investor protection.

As the regulatory landscape evolves, the integration of Bitcoin into 401(k)s remains contingent on balancing opportunity with risk. While the executive order opens the door for alternative investments, the ultimate impact will depend on how effectively fiduciaries navigate volatility, fees, and participant education. For now, the market’s response—marked by both record highs and cautionary warnings—highlights the complex interplay between policy, investor behavior, and the maturation of crypto as a mainstream asset class.