Labor Department proposes 401(k) safe harbor for crypto assets

The U.S. Department of Labor on March 30 released a proposed rule for public inspection that would create a safe harbor for 401(k) plan fiduciaries evaluating alternative investments, including funds with exposure to cryptocurrencies and other digital assets. Formal publication in the Federal Register is scheduled for March 31.

The rule lays out a process-based protection: fiduciaries who document reviews of performance, fees, liquidity, valuation, appropriate benchmarks, and product complexity before adding an option to a plan menu would qualify for a safe harbor. The department describes the framework as a clarification of existing duties under federal retirement law rather than a new investment standard.

The proposal implements President Donald Trump’s directive issued last August to expand access to alternative assets in participant-directed 401(k) plans.

Few defined contribution plans currently offer alternatives, and allocations remain limited. Americans held about $10.1 trillion in 401(k) plans at the end of 2025 within a broader $14.2 trillion defined contribution market, according to data cited in the proposal. The Labor Department estimates the participant-directed segment at $8.8 trillion across roughly 721,000 plans. Only 4% of defined contribution plans offered alternatives last year, and just 0.1% of assets were invested in them.

The draft follows the department’s action in May to rescind earlier guidance that had urged fiduciaries to exercise “extreme care” before adding crypto to plan lineups, a position the agency determined went beyond what federal law requires.

Industry figures pointed to both opportunity and operational work. Andrew M. Bailey, a senior fellow at the Bitcoin Policy Institute, called retirement funds “the holy grail for bitcoin enthusiasts looking for new investors: oceans of cash, tax-advantaged.” In his view, retirement horizons measured in decades can fit investments in new technologies, while risk controls and regulation pull in the opposite direction. He welcomed rule changes “that empower savers to make their own choices,” while questioning whether savers will participate. He also flagged a secondary issue: whether direct 401(k) access to Bitcoin would reduce demand for equity-based exposure products or complement them.

Legal specialists framed the draft as putting digital assets on the same footing as other alternatives if fiduciaries can demonstrate a rigorous process. “If a fiduciary can document a robust process on fees, liquidity, valuation and complexity, they now have a clear safe harbor roadmap instead of a regulatory minefield,” observed Joshua Chu, a lawyer and lecturer. He cautioned that plan providers still need to build “daily pricing, liquidity, and risk controls” for crypto inside 401(k) wrappers before such options reach participants, and noted that U.S. retirees could gain regulated exposure ahead of many Asian markets, where pension rules and trading restrictions limit access.

Skeptics in Congress warned of added risks for savers. In a letter to regulators and the Labor Department, Senator and Bernie Sanders warned that encouraging 401(k) providers to invest in riskier assets, including crypto, could cause “financial harm” to millions of Americans if widely adopted by the retirement industry. Elizabeth Warren pressed the SEC for details on how it will address crypto risks in retirement accounts.

On Capitol Hill, Rep. Troy Downing of Montana plans to introduce legislation to codify the August order into federal law, which could prompt more plan providers to consider adding Bitcoin and other cryptocurrencies to their menus.

The Labor Department emphasized that the safe harbor would not dictate investment choices or endorse specific products. The agency aims to provide a defined legal pathway for fiduciaries that can demonstrate prudent, well-documented processes when considering alternatives for 401(k) plans. The proposal now heads to formal publication, with open questions on operational readiness, pricing and valuation practices, and participant demand.