Lawmakers and federal officials are exploring ways to allow Americans to invest in cryptocurrencies through their 401(k) and other retirement plans. This shift comes after a recent executive order aimed at broadening access to alternative assets—including cryptocurrencies, private equity, and real estate—in retirement accounts.
Previously, regulators urged caution around cryptocurrencies in retirement plans, citing their risks, volatility, and concerns over transparency. However, the U.S. Department of Labor has now stepped back from that strict approach. The current guidance asks fiduciaries, such as those managing 401(k)s, to evaluate digital assets carefully, considering the specific circumstances and best interests of retirement savers.
As a result, lawmakers in at least 20 states have proposed allowing state-run pension funds to allocate a small percentage—typically between 5% and 10%—to digital assets. These proposals often include restrictions designed to limit risk, such as market capitalization requirements that exclude volatile “meme coins.” Investments can be made by directly purchasing well-established cryptocurrencies or indirectly through related products and companies.
Supporters believe that opening retirement accounts to alternative assets like cryptocurrency can offer higher potential returns and greater diversification. They argue that this move could help future retirees benefit from emerging investment opportunities outside the traditional stock and bond markets.
However, experts caution that these assets carry special challenges. The risks associated with cryptocurrencies—such as sudden price swings and unclear regulatory standards—remain significant. Private equity and real estate can also be less liquid, making it harder for investors to access their funds quickly if needed. Fiduciaries are being urged to develop a thorough understanding of these investments before offering them as options in retirement plans.
As the conversation continues, both state and federal officials are monitoring the potential benefits and risks. Investors considering these new opportunities should remain aware of the unique characteristics of alternative assets and ensure they align with their long-term retirement goals.