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In 2022, the Biden-era Department of Labor warned fiduciaries to “exercise extreme care” before adding a cryptocurrency option to their 401(k) plans, however, last month the agency rescinded that guidance. And now, four ranking members of the Democratic party have expressed their strong concern about the DOL’s decision, in a letter sent to Labor Secretary Lori Chavez-DeRemer.
“The cryptocurrency market is extremely volatile, making it unfit to serve as a retirement investment tool,” wrote Senate Democratic Whip Dick Durbin (D-IL), Ranking Member of the Senate Judiciary Committee, along with Senator Elizabeth Warren (D-MA), Ranking Member of the Senate Banking Committee, and Senators Tina Smith (D-MN), and Chris Van Hollen (D-MD).
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The DOL’s guidance “cautioned plan fiduciaries to ‘exercise extreme care’ before considering the inclusion of crypto in 401(k) plans,” the Senators wrote. “This guidance came after the Department found that investments in cryptocurrency ‘present significant risks and challenges to participants’ retirement accounts, including significant risks of fraud, theft, and loss.’ Thus, we strongly urge you to reinstate this guidance to ensure retirement security for millions of hardworking Americans.”
After President Trump announced his “Liberation Day” tariffs in April, “the value of Bitcoin, one of the most popular cryptocurrencies, plunged by 10%,” wrote the Senators. “And in the last five years alone, the value of Bitcoin has swung from lows of less than $17,000 to highs more than $111,000. With the Administration’s continuing—and constantly changing—trade wars, this volatility will continue.”
When rolling back the DOL’s crypto guidance, “We’re … making it clear that investment decisions should be made by fiduciaries, not DC bureaucrats,” said Secretary Chavez-DeRemer. The DOL reaffirms its neutral stance, neither endorsing, nor disapproving of, plan fiduciaries who conclude that the inclusion of cryptocurrency in a plan’s investment menu is appropriate, according to a statement.
However, “millions of Americans rely on their 401(k) plans to retire with dignity,” the Senators wrote in their letter. “These plans are tax-advantaged, and are meant to incentivize retirement security over speculative investment. Employers who sponsor 401(k) plans have a statutorily mandated fiduciary duty to exercise prudence and care in selecting investment options offered in their plans.
“Some providers of retirement services already offer exposure to crypto in 401(k) plans. The Department’s imprudent decision to rescind its previous guidance gives other retirement service providers the green light to include a volatile asset in their plans, and strips guardrails against risk in retirement investment products.”
The Senators concluded, “The fluctuations in the cryptocurrency market, as well as the volume of illicit finance that cryptocurrency facilitates, indicates that crypto is a risky, unstable investment. Americans deserve strong protection of their hard-earned retirement savings.”
Related: Crypto in 401(k) plans? Yes, as DOL rolls back Biden-era investment warning to fiduciaries
However, President Trump has vowed to make the U.S. the "crypto capital of the planet." To further show his commitment to crypto, his social media company, Trump Media and Technology Group, announced it will raise about $2.5 billion to invest in bitcoin.
Shortly after he took office in January, President Trump appointed “CryptoMom” Hester Peirce, who was appointed by Trump to the Securities and Exchange Commission during his last administration, to lead the SEC’s new task force to develop clear rules for digital assets, encouraging compliance and reducing fraud.
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Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
