Labor Department Plan Would Set No 401(k) Crypto Market-Cap Floor

By Daniel Okafor

The U.S. Department of Labor submitted a proposal on Thursday, Nov. 5 that would allow cryptocurrencies in 401(k) plans without setting a minimum market capitalization, leaving tokens of any size eligible for consideration as the measure awaits White House review.

According to the proposal submitted for final review on Nov. 5, the department names no specific cryptocurrencies and establishes no market-cap floor. The document addresses size-based eligibility without identifying individual assets, and it does not settle which investments a retirement plan selects.

The practical effect at this stage is procedural. The Labor Department's submission does not itself authorize plan offerings or trigger investments. White House review and further procedural steps remain, so the proposal cannot deliver the projected availability window on its own.

How would the proposal handle asset selection?

Plan managers could weigh the following factors under the proposal:

• Performance history
• Fees
• Liquidity
• Valuation
• Benchmarks
• Investment complexity

The proposal treats those six factors as considerations rather than requirements. It does not impose a performance test, liquidity floor, valuation standard or benchmark, and it does not make any category an automatic pass-or-fail test for a token.

That distinction allows plans to apply their own commercial and operational judgment. The absence of a market-cap floor removes one stated eligibility barrier, but it does not eliminate due diligence into a token's history, liquidity or valuation.

Bitcoin (BTC) and Ether (ETH) may be better positioned than smaller tokens because they have more established markets and investment products. Neither is named in the proposal, and their relative position is not approval or guaranteed inclusion in a retirement plan.

Smaller tokens may face greater practical hurdles if they have limited performance histories, liquidity or reliable valuation benchmarks. Those concerns could arise during manager due diligence even though the proposal creates no size-based exclusion and does not elevate the concerns into formal requirements.

Why might crypto funds arrive before direct holdings?

Crypto exchange-traded funds and managed funds may reach 401(k) plans before products that hold tokens directly. The stated reason is operational: these fund products fit existing custody and account-management systems more closely.

For plan administrators, the distinction concerns how crypto exposure would enter the retirement account. A fund product can use a custody and account-management framework closer to the one already in place, while a direct-token product requires a different holding arrangement. The proposal's sequence reflects system fit rather than a ranking of investment quality.

Direct-token holdings may therefore arrive later, although the proposal gives no separate timetable for those products.

When could retirement plans offer crypto?

Some investment options could appear in 2027, with broader coverage around 2028. The projected sequence is staged: a narrower set of options would precede broader availability, though the proposal does not specify which products would fall into the first group.

Those dates are potential milestones, not a final effective date. The proposal still needs to complete White House review and further procedural steps before that timetable can hold.

What would the proposal leave to fiduciaries?

Retirement plan fiduciaries would retain their duties and potential litigation exposure even if the proposal clears review and permits crypto investment options. Permission to consider crypto would not replace plan-level responsibility for assessing performance, fees, liquidity, valuation, benchmarks and complexity.

That responsibility remains commercially relevant under the flexible screening approach. Bitcoin and Ether may be better positioned in plan discussions, while smaller assets may need stronger liquidity and valuation records to address the practical hurdles described in the proposal.

The next firm checkpoint is completion of White House review, after which further procedures would determine whether the projected 2027–2028 availability window holds.