Recently, the Politico news publication reported that the Department of Labor announced on Wednesday that it is withdrawing guidance from the Biden administration that strongly discouraged employers from including cryptocurrency options in employee 401(k) retirement plans.    

The policy reversal opens the door for crypto in retirement plans. Labor Secretary Lori Chavez-DeRemer characterized the previous policy as regulatory overreach, stating that the prior administration attempted “to put their thumb on the scale” against cryptocurrency investments.

“We’re rolling back this overreach and making it clear that fiduciaries, not DC bureaucrats should make investment decisions,” Chavez-DeRemer said in an official statement.

Background on Previous Guidance

The March 2022 compliance document had established a cautious framework for cryptocurrency in retirement plans:

• Fiduciary Warning: Plan administrators were advised to “exercise extreme care” before adding cryptocurrency products to 401(k) investment menus
• Liability Concerns: The guidance suggested that failing to exercise such care could constitute a breach of fiduciary duty, potentially exposing employers to liability for investment losses
• Regulatory Approach: While the document created significant deterrent effects, it stopped short of an outright prohibition on cryptocurrency investments

Implications for Employers and Workers

This policy reversal potentially opens new investment avenues for retirement plan participants while shifting decision-making authority back to plan fiduciaries and individual investors.

Administration’s Pro-Crypto Stance

The Labor Department’s policy reversal reflects the Trump administration’s broader embrace of the cryptocurrency industry. This shift aligns with the administration’s generally supportive approach toward digital asset innovation and investment.

Trump Family Business Interests

The policy change coincides with cryptocurrency-related business developments within the Trump organization:

• Truth Social Bitcoin Treasury: The Trump-owned parent company of the Truth Social platform announced Tuesday its intention to establish a “bitcoin Treasury”
• Fundraising Plans: The company aims to raise $2.5 billion from investors to support this cryptocurrency initiative

High-Profile Administration Engagement

The administration’s commitment to the crypto sector is further demonstrated through direct engagement:

• Vice Presidential Participation: Vice President JD Vance is scheduled to deliver a keynote address at a bitcoin conference in Las Vegas on Wednesday

Regulatory Approach Going Forward

Rather than issuing replacement guidance, the Department of Labor is adopting what it characterizes as a “neutral approach” to cryptocurrency and other investment assets. This represents a significant departure from the previous administration’s cautionary stance on digital assets in retirement planning.

The absence of new restrictive guidance effectively gives plan fiduciaries greater discretion in making cryptocurrency investment decisions for 401(k) participants.