U.S. lawmakers are pressing the Securities and Exchange Commission (SEC) to take swift action to facilitate the inclusion of cryptocurrency in the nation’s 401(k) retirement plans. In a letter addressed to SEC Chair Paul Atkins, nine legislators, led by House Financial Services Committee Chairman French Hill and Capital Markets Subcommittee Chair Ann Wagner, emphasized the urgency of implementing a recent executive order from former President Donald Trump.
The executives’ order, signed in August, aims to “Democratize Access to Alternative Assets for 401(k) Investors” and directs the SEC to reevaluate its existing policies on alternative investments, including cryptocurrencies, in retirement plans. The lawmakers have urged Atkins to assist the Secretary of Labor in making necessary regulatory adjustments to allow broader access to these assets.
“We are hopeful that such actions will help the 90 million Americans who are currently restricted from investing in alternative assets to secure a dignified, comfortable retirement,” the representatives stated. They advocate for a balanced approach that would enable fiduciaries to consider alternative investments when they believe these options could enhance risk-adjusted returns for plan participants.
This renewed push follows the SEC’s previous cautionary stance on cryptocurrencies as retirement investments. In May, the Labor Department issued a warning advising fiduciaries to exercise extreme caution regarding crypto assets in retirement portfolios. However, the current letter indicates a shift in sentiment, recognizing the potential benefits of allowing diversified investment strategies.
“Every American preparing for retirement should have access to funds that include investments in alternative assets when the relevant plan fiduciary determines that such access provides an appropriate opportunity,” the lawmakers emphasized.
If implemented, Trump’s executive order could significantly impact the massive $9.3 trillion U.S. 401(k) retirement market. Just a modest allocation of 1% of these funds into cryptocurrencies could lead to an influx of approximately $93 billion. This figure far exceeds the estimated $60.6 billion invested in exchange-traded funds (ETFs) focused on Bitcoin since their launch in January 2024.
In recent developments, some public pension funds have begun exploring crypto investments. For instance, the State of Michigan Retirement System increased its crypto holdings earlier this year, acquiring $10.7 million in ARK 21Shares Bitcoin ETF shares and retaining a significant portion of the Grayscale Ethereum Trust, valued at around $15.6 million. This trend signals a growing interest among institutional investors in diversifying their portfolios with crypto assets.
Conversely, the State of Wisconsin Investment Board recently divested its shares in BlackRock’s iShares Bitcoin Trust ETF after initially being one of the early adopters in the public pension fund space. These contrasting moves highlight the cautious yet increasingly open attitude of institutional investors toward cryptocurrency.
The growing influence of lawmakers and changes in investment strategies among pension funds suggest a potential transformation in how cryptocurrencies are viewed within the context of retirement savings. As regulatory frameworks evolve, the coming months will be crucial in determining whether cryptocurrencies will become a standard investment option for American workers planning for retirement.
