Labor Department Moves to End Crypto Ban in 401(k) Plans

TLDR

• The U.S. Department of Labor proposed a rule that removes prior federal barriers on crypto in 401(k) plans.
• The department withdrew its 2022 guidance that urged fiduciaries to exercise extreme care with digital assets.
• The new proposal states that fiduciaries cannot be sued solely for offering a crypto-linked investment option.
• The rule introduces a six-factor safe harbor that fiduciaries must document before including crypto investments.
• The framework requires review of risk-adjusted performance, fees, liquidity, valuation, benchmarking, and fiduciary understanding.

The U.S. Department of Labor has proposed a rule that removes prior federal barriers to crypto in 401(k) plans. The agency reversed its 2022 guidance that urged fiduciaries to exercise “extreme care” with digital assets. Officials stated that the earlier language lacked grounding in ERISA and imposed litigation pressure on plan sponsors.

DOL Reverses 2022 Crypto Ban Guidance

The department withdrew its 2022 warning and replaced it with a neutral position on digital assets. In 2022, the agency told fiduciaries to exercise “extreme care” before offering cryptocurrency options. Now, the department stated that the phrase was “not found in ERISA,” and it removed that language entirely.

Officials said the prior stance had no clear statutory basis under federal retirement law. As a result, fiduciaries can now consider crypto-linked funds without facing automatic legal exposure. The proposal states that plan administrators cannot be sued solely for including a crypto option.

However, the rule does not endorse digital assets as preferred investments. Instead, the agency said it aims to restore a neutral standard under ERISA. The department emphasized that fiduciaries must still act in participants’ best interests.

The proposal creates a six-factor safe harbor for crypto-related investments. Fiduciaries must assess risk-adjusted performance and fee reasonableness before inclusion. They must also review liquidity, valuation methods, benchmarking standards, and their own understanding of the product.

If administrators document these six factors, the rule provides a presumption of prudence. The agency stated that clear documentation will remain essential. Therefore, fiduciaries must maintain detailed records for compliance reviews.

The proposal also addresses valuation standards for alternative assets. Private equity often relies on periodic appraisals that can lag market conditions. In contrast, cryptocurrency trades continuously on public exchanges with observable prices.

The department recognized observable market pricing as a valid valuation method. This acknowledgment places digital assets within the same evaluative framework as other market-traded investments. Consequently, fiduciaries may rely on transparent pricing data when conducting reviews.

Senators Advance Bitcoin Reserve Bill as Crypto Ban Ends

On March 30, Senators Cynthia Lummis and Bill Cassidy introduced the “Mined in America Act.” The bill seeks to formalize a Strategic Bitcoin Reserve in federal law. It also aims to strengthen domestic production of Bitcoin mining hardware.

Lummis has long supported cryptocurrency policy initiatives in Congress. She stated that reliance on foreign mining equipment creates national security concerns. The bill describes dependence on Chinese-linked supply chains as a “dangerous dependency.”

The legislation proposes incentives for U.S.-based mining hardware manufacturers. It links industrial policy goals with the federal digital asset strategy. The sponsors argue that domestic production will reduce reliance on overseas suppliers.

The bill also supports the concept of a federally recognized Bitcoin reserve. Lawmakers said the executive branch has already moved toward that objective. The legislation would codify those steps through statutory authority.

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