Industry, financial experts sound off after DOL walks back crypto warning for 401(k)s

Fiduciaries deciding whether to offer cryptocurrency options in 401(k) investment menus have a little more clarity following the Labor Department’s decision this week to rescind its 2022 guidance on digital assets in workplace retirement plans.

On Wednesday, the Employee Benefits Security Administration at the Department of Labor formally withdrew the prior guidance, ending a three-year period over which fiduciaries were urged to exercise “extreme care” when evaluating crypto assets for retirement plans.

Critics had argued the DOL's 2022 release broke from its long-standing neutral stance and appeared to single out one asset class without issuing a formal rule.

'Thumb on the scale'

In a statement accompanying the reversal, Labor Secretary Lori Chavez-DeRemer criticized the earlier approach as regulatory overreach.

“The Biden administration’s department of labor made a choice to put their thumb on the scale,” she said Wednesday. “We’re rolling back this overreach and making it clear that investment decisions should be made by fiduciaries, not D.C. bureaucrats.”

While the department emphasized that it is not endorsing or disapproving of cryptocurrency in retirement plans, the reversal was widely viewed as a shift back to a more conventional interpretation of fiduciary standards under the Employee Retirement Income Security Act.

The Investment Company Institute, which represents mutual fund and ETF providers, welcomed the move as a return to legal fundamentals.

“As we noted in 2022, the prior guidance was inconsistent with law and lacked a legal basis,” the group said Wednesday. “The choice to include cryptocurrency in retirement plan investments or not should be left up to the plan fiduciaries, who are in the best place to make decisions.”

Stephan Shipe, founder and CEO of Scholar Financial Advising, noted that the change restores discretion to fiduciaries, but it does not alter the fundamental framework of legal obligations governing plan decisions.

“While this opens the door for plan fiduciaries to consider crypto options, it doesn't eliminate their fundamental fiduciary responsibilities,” Shipe said in emailed comments to InvestmentNews. “The decision simply moves investment choices away from the government and to the fiduciaries who are already regulated in how they provide advice.”

No real change

While meant to protect investors in workplace retirement plans, the 2022 DOL statement also caused a rift across the industry, with divided opinions over whether it constituted an effective ban on crypto in 401(k) plans.

Miles Fuller, a 15-year IRS veteran and current head of government solutions at TaxBit, highlighted the unusual and potentially intimidating tone in the original 2022 DOL guidance.

“DOL historically had not issued this type of guidance – directed at a specific type of investment asset – so the release came across… as a somewhat veiled threat,” Fuller said in a reaction to the new DOL guidance Wednesday. “The 2022 release, despite its ominous tone, really did nothing to actually change the law.”

With the Labor Department's new Compliance Assistance Release No. 2025-01, which formally rescinds the previous 2022 statement and reaffirms the legal framework to follow in 401(k)s, Fuller said fiduciary plan advisors have fresh reassurance to consider crypto as "a legitimate investment asset to include [depending] on the facts and circumstances surrounding the plan, the employer, the employees and market conditions."

But despite regulatory shifts favoring crypto over the past few months – including this month's withdrawal of a 2019 joint statement by the Securities Exchange Commission and FINRA on broker-dealer custody of digital asset securities – he doesn't anticipate DOL's update will trigger an immediate crypto rush in retirement plans. 

“Time and changes in market conditions are likely the biggest catalysts,” he said. “We also now have crypto-based ETFs and increased institutional adoption, which will likely influence the legal analysis in a positive way.”