US President Donald Trump signed an executive order on August 7th, allowing codes in his 401(k) retirement plan. The crypto industry calls the move a victory for adoption, but investment experts warn it will involve a huge risk.
The “Democratize Access to Alternative Assets for 401(k) Investors” order directed US financial regulators to expand access to crypto and private companies in their 401(k) plan.
The 401(k) employee sponsored investment scheme is one of the most popular retirement plans in the United States. As of 2024, the 401(k) plan had $8.9 trillion in assets. This represents a major source of demand for cryptocurrency, which could cause prices to skyrocket.
Crypto traders may view this move as a bullish signal for further price surges, but financial experts and market observers say there is a significant risk.
What risks does Bitcoin pose to 401(k) investors?
Trump’s order paves the way for investments that had previously been locked out of America’s most popular retirement plans, and directs the U.S. Labor Bureau to reassess the restrictions on six different asset groups.
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Private Equity
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Real estate (including debt certificates protected by the real estate)
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Proactively managed crypto investment products
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merchandise
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Financing for infrastructure development
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Longevity risk sharing pool.
Industry observers argue that increasing capital that appears in the crypto market will increase crypto prices. André Dragosch, head of European research at Bitwise at Crypto Asset Manager, told Cointelegraph on X’s “Chain Reaction” show that Bitcoin prices could pass $200,000 by the end of the year.
Is Bitcoin heading towards its 2025 peak? Or is it dead for the 4-year cycle? https://t.co/dckfjvkjix
– Cointelegraph (@cointelegraph) August 18, 2025
CJ Burnett, Chief Revenue Officer of Compass Mining, told Cointelegraph:
A 401(k) is a US employer-sponsored retirement savings plan that allows employees to contribute a portion of their income that is often partially consistent with their employer. 401(k)s are often tax deferred or tax advantages.
The 401(k) may be suitable for crypto, but financial experts are not sure if crypto is suitable for 401(k).
One issue related to observers was the high fees associated with some of these alternative investments. According to the Investment Company Institute (ICI), most 401(k) plan assets average only 0.26%, but private equity generally uses a “2 and 20” structure, with managers collecting returns of 2% and 20% of the total.
“I don’t think people are talking fully about the potential for higher rates,” said Philitsa Hanson, head of product, equity and fund management at Allvue Systems.
The executive order “supposes more questions than answers,” Hanson continued. “Someone has to be very thoughtful about how you can incorporate these types of assets.”
Bitcoin (BTC) Exchange-Traded Funds (ETFs) generally enjoy fees comparable to the average ICI, but major outliers such as the ProShares Bitcoin Strategy ETF, Valkyrie Bitcoin, Ether Strategy ETF, and Grayscale Bitcoin Trust ETF have fees of 0.95%, 1.24% and 1.50%, respectively. Fees also do not include other aspects that affect profitability, such as liquidity and transaction costs.
Related: Michigan Pension Fund will deepen Bitcoin exposure with ARKETF’s $11 million shares
Ally Rosenbaum of Rosenbaum Law Firm writes that Bitcoin is too unstable to be included in the 401(k). “What kind of due diligence did you perform?” “Where were the risk disclosures?”
He called the code “trustor minefield.” It includes complex mechanisms such as staking, forks, and airdrops, and has complex tax treatment. “I suddenly created a nightmare for participant education.”
Margaret Rosenfeld, chief legal officer of staking provider Everstake, told Cointelgraf:
“That being said, these risks are insurmountable.”
401(k) plans require a “piping upgrade”
Rosenfeld said that regulations and guidance updates around the 401(k) can mitigate many of the associated risks. First, she proposed to create a clear standard for what is considered a “cautious” digital asset.
She said the Employee Retirement Income Security Act of 1974 regulated what should be included in a retirement plan and was “built for stocks and bonds, not for blockchain.”
Rosenfeld recommends “upgrade your retirement system to plumbing,” saying, “the record keeping system where the 401(k) is not designed for fork, airdrop, or real-time volatility. You need a digital asset-enabled platform that automatically tracks all on-chain events.”
She also said regulators need to define liquidity, transparency pricing, custody and cybersecurity benchmarks to ensure that certain digital assets are “retirement responses” including independent risk assessments.
“A well-managed 401(k) crypto can diversify retirement portfolios and increase transparency in spaces that are often operated outside of facility monitoring,” Rosenfeld said.
But many things are subject to proper management of cryptography. Rosenbaum writes that Crypto could be a valuable addition to his retirement portfolio as it offers diversification, hedging against inflation and “exposure to financial innovation.” Still, it does not belong to the 401(k).
“Use a securities account. Use a Roth IRA with a self-directed option. Use discretionary income. However, don’t use plans designed to be a financial lifeline for someone else’s retirement,” he said.
Rosenbaum writes that as things stand, the code is not a viable asset of 401(k). “It’s a shiny object, which puts participants and sponsors at unnecessary risk. A conservative 1%-5% allocation does not solve the underlying problem. Volatility and complexity do not mix with retirement plans.”
The Trump administration’s move to ease the 401(k) requirement has been repeated in recent legislation, with user protection and systematic risks in the backseat, boosting the adoption of crypto and the digital asset industry. The integration of crypto into traditional financial systems has not been stress-tested and results are unpredictable.
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This article does not include investment advice or recommendations. All investment and trading movements include risk and readers must do their own research when making decisions.
