Trump Administration Lifts Crypto Restrictions in 401(K) Plans, Reversing Biden-Era Policy

The Trump administration on May 28 rescinded guidance issued under President Biden that urged caution around adding cryptocurrency and digital assets to 401(k) retirement plans, easing the path for employers to offer such investments.

The 2022 Biden-era guidance had advised retirement plan sponsors to exercise “extreme care” when considering digital assets like bitcoin, NFTs, meme coins, and other crypto derivatives, citing risks of fraud, theft, and market volatility. That guidance is now withdrawn in full, according to a compliance bulletin from the Department of Labor.

Trading charts | Source: Pexels

The Labor Department stated the prior standard was inconsistent with the Employee Retirement Income Security Act (ERISA), which governs retirement plan fiduciary responsibilities. “Prior to the 2022 release, the Department had usually articulated a neutral approach to particular investment types and strategies,” the agency said.

The revised position signals neither endorsement nor disapproval of crypto assets in retirement portfolios. The Department said it aims to treat digital assets similarly to other investment types, covering a “wide range” of tokens, coins, and related instruments.

Critics argue the reversal could expose retirement savers to unnecessary risk. “As a huge general rule, crypto doesn’t belong in a 401(k), period, end of sentence,” said Knut Rostad, president of the Institute for the Fiduciary Standard. “It sends the wrong message by eliminating a yellow caution light and putting in place a green light.”

Crypto currency coins | Source: Pexels

Philip Chao, a certified financial planner and retirement plan consultant, warned that employers still bear fiduciary liability under ERISA. “It’s not a given employers will rush to offer crypto,” he said, noting potential legal risks if crypto holdings lose value.

The decision comes as former President Trump promotes a $TRUMP meme coin, which has significantly increased his paper wealth and prompted calls for an ethics investigation by Democratic senators.