Labor Proposal Advances 401(k) Access for Digital Assets

A U.S. Department of Labor proposal to ease 401(k) access to crypto and other alternative investments reached final White House review on Thursday, Nov. 12, with plan administrators set to assess six risk factors if adopted.

The Department sent the March measure to the White House Office of Management and Budget (OMB) for final review, bringing the proposal closer to a decision on retirement-plan options.

The proposal would not automatically make every digital asset eligible. It sets no minimum market capitalization and does not limit eligible token types.

What would the Labor Department change?

Issued in March, the proposal would simplify the process for adding alternative investments to retirement plans. It would also give employers and plan administrators some legal protection as they evaluate those investments.

That protection would accompany discretion rather than a prescribed list of approved crypto assets. With no digital-asset limit or minimum capitalization threshold, the proposal would leave plan administrators to assess individual offerings under a common framework.

How would administrators evaluate crypto investments?

Plan administrators would have to consider six areas:

• Performance: Past performance, which smaller-cap tokens may struggle to provide for review.
• Fees: The fees associated with an investment.
• Liquidity: Whether the proposed exposure meets the plan’s liquidity requirements.
• Valuation: How the investment or digital asset gets valued.
• Benchmarks: The measures used to evaluate performance.
• Complexity: The complexity of the investment option.

The six-part screen would not replace administrator judgment with an automatic crypto whitelist. Instead, administrators would need to document how each investment fares across those areas before adding it to a plan.

Which tokens could qualify first?

Teresa Goody Guillén, managing partner at Bellementis PLLC, said: “Bitcoin (BTC) and Ether (ETH) could be considered earlier than other tokens because their markets and investment products are more developed.”

Guillén said altcoins would not face automatic exclusion. They would still have to meet standards for prudent investing, liquidity, valuation and investor protection, leaving smaller assets to address more demanding due-diligence requirements.

Her assessment points to an uneven path toward inclusion: the two largest assets by market value have deeper markets and more developed investment products, while other tokens would need to satisfy the same underlying standards with less established trading and performance records.

Why would smaller altcoins face more scrutiny?

Trace Finance co-founder and CEO Bernardo Brites said: “Tokens with smaller market capitalizations could have a harder time with reviews of past performance and benchmarks.”

That creates a practical hurdle without creating a formal exclusion. The proposal establishes no market-cap floor, but administrators reviewing shorter operating histories or fewer established benchmarks could reach different conclusions about tokens with smaller capitalization.

The result could be a practical hierarchy even without a numerical asset limit. Bitcoin and Ether may receive earlier consideration because their markets and products are more developed, while altcoins must demonstrate that they can satisfy liquidity, valuation, performance and complexity standards.

Would funds or direct crypto enter plans first?

The proposal does not require crypto exposure to be held through an exchange-traded fund or managed fund. It therefore does not make a fund wrapper the sole route to 401(k) exposure or direct holdings a prerequisite.

Guillén nevertheless expects exchange-traded funds and managed funds to reach 401(k) plans before direct crypto holdings, reflecting the greater development of those investment products.

For employers and plan administrators, that expected sequence would make investment-product selection the first implementation question rather than direct token ownership. It also preserves room for direct holdings under the proposal, but only after plan administrators satisfy the same six-factor review and applicable standards for prudent investing and investor protection.

Completion of OMB’s final review is the next decision point; until the White House rules, the proposal leaves token categories open, sets no market-cap floor and keeps asset selection with plan administrators.