Labor Department Proposes Rule Opening $10 Trillion 401(k) Market to Crypto

The U.S. Department of Labor on Monday proposed a rule that would create a legal safe harbor for retirement plan fiduciaries who add cryptocurrencies and other alternative assets to 401(k) investment menus. The proposal carries out a directive from President Donald Trump’s August executive order to expand access to digital assets in retirement portfolios, and could open the door for a share of the $10.1 trillion sitting in American 401(k) accounts to flow into crypto for the first time.

Under the proposed framework, fiduciaries who document a review process covering performance, fees, liquidity, valuation, and complexity would receive safe harbor protection when offering alternative investments, including funds with crypto exposure. Currently, only 4% of defined contribution plans offer any alternative investments, with a mere 0.1% of assets allocated to them. The broader participant-directed retirement market totals roughly $8.8 trillion across 721,000 plans, according to Labor Department data.

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The rule follows the Labor Department’s decision last May to rescind Biden-era guidance that had urged fiduciaries to exercise “extreme care” before adding crypto to retirement plans. That standard, the agency said, went beyond what federal retirement law actually requires. SEC Chairman Paul Atkins endorsed the shift in January, saying “the time is right to go forward with that in a measured way that has guardrails to protect the retirees.” Fidelity already offers crypto IRAs for Bitcoin, Ethereum, and Litecoin, but 401(k) plans have remained largely off-limits.

The proposal drew sharp criticism from Sen. Elizabeth Warren, who warned it could expose workers to losses while benefiting large financial firms. Supporters counter that the rule simply puts digital assets on the same playing field as other alternative investments, giving savers access to diversification options already available outside retirement accounts.

The potential scale of capital reallocation is what makes the proposal significant for crypto markets. Even modest adoption could move billions of dollars into digital asset funds. If plans representing just 1% of 401(k) assets were to allocate 1% to crypto, that alone would translate to roughly $1 billion in new inflows. The rule is open for public comment before any final adoption.