Smaller cryptocurrencies may eventually find a place in US 401(k) retirement plans under a proposed Labor Department rule now advancing through the White House review process. The measure is designed to make it easier for employers and plan managers to consider “alternative investments” such as crypto, while also improving legal protection for those who choose to offer them.
However, experts caution that the transition is unlikely to be evenly beneficial for smaller tokens. The rule does not name which digital assets could qualify or require any minimum market capitalization, but it asks plan fiduciaries to assess six categories—including pricing, liquidity, fees, and valuation—before adding any crypto exposure.
Key takeaways
- The Labor Department’s proposed rule would expand the practical pathway for 401(k) plans to consider crypto-like alternative investments, subject to prudence standards.
- Plan managers are guided to evaluate performance, fees, liquidity, valuation, relevant benchmarks, and complexity—without an explicit market-cap cutoff.
- Experts expect Bitcoin and Ether to be the first cryptocurrencies adopted due to established market infrastructure and investment products.
- Smaller tokens may be harder to justify because fiduciaries must demonstrate reliable pricing, sufficient liquidity, and trackable risk controls.
- Adoption may come in stages, with crypto ETFs or managed funds likely arriving before direct holdings in retirement accounts.
White House review and what the proposal changes
The Labor Department’s rule reached the White House for final review on Thursday, according to the Office of Information and Regulatory Affairs. The proposal aims to reduce friction for retirement plan providers that want to offer alternative investments, including digital assets, by offering a clearer framework for how fiduciaries can evaluate them.
The Labor Department’s March proposal does not specify which cryptocurrencies could be included and does not establish a minimum market capitalization requirement. Instead, it directs plan managers to consider six factors when selecting investments: performance, fees, liquidity, valuation, benchmarks, and complexity.
Even with the framework, offering crypto remains discretionary rather than guaranteed. Plan committees would still need to document why particular investments meet retirement-appropriate standards of prudence and investor protection.
Why Bitcoin and Ether may come first
Legal and operational practicality will likely determine which assets get listed first. Teresa Goody Guillén, managing partner at Bellementis PLLC, said Bitcoin and Ether are “likely to be the first” offered because they have established markets and investment products.
Guillén pointed to market capitalization figures from CoinGecko—approximately $1.5 trillion for Bitcoin and $273 billion for Ether as of 20:01 UTC on Nov. 6. Still, she emphasized that market size alone should not be treated as the deciding factor for fiduciary suitability.
In her view, plan managers must show that an investment choice satisfies the same prudence, liquidity, valuation, and investor-protection expectations used for any other retirement option. She also argued that size is not a proxy for suitability: “Big doesn’t mean suitable, and small doesn’t mean disqualified.”
Bernardo Brites, co-founder and CEO of Trace Finance, agreed on the framework logic while underscoring that the practical gating issue is whether fiduciaries can responsibly support a crypto investment with the information systems retirement plans require. He said the relevant hurdle is the ability to document reliable daily pricing “from a regulated wrapper.” In his formulation: “If not, it is not going in.”
What makes smaller tokens tougher to fit
While the proposal does not bar smaller cryptocurrencies outright, experts say they could face more hurdles in real-world plan committee decisions. Guillén noted that altcoins are not automatically excluded, but plan managers would still have to demonstrate sensible risk management against the rule’s stated factors.
Brites suggested that the decisive questions may be more concrete than market-cap debates. He framed the “test” for adding assets as a matter of whether plan committees can build a defensible record—especially around consistent pricing and measurable benchmarks—before fiduciaries can document why a selection is prudent.
That distinction matters because retirement plan governance typically demands repeatable processes and auditable documentation. If a smaller token lacks a deep market, consistent liquidity, or sufficient benchmark and valuation references, it can become harder for fiduciaries to justify the choice under retirement-plan standards—even if the proposed rule is designed to lower legal barriers.
ETFs and managed funds may be the entry point
Although the Labor Department proposal does not restrict crypto exposure to exchange-traded funds (ETFs) or managed funds, experts believe those structures are likely to arrive earlier than direct token holdings. Guillén said ETFs and managed funds are more likely at first because they align with existing custody and recordkeeping systems used by retirement plans.
Holding crypto directly would add additional concerns related to storage, cybersecurity, and pricing transparency. In her view, those issues should not automatically eliminate consideration, but they raise implementation complexity compared with fund-based exposure.
Brites similarly expects gradual deployment. He said brokerage options are likely to appear first, followed by standalone ETFs and then funds that include small allocations of crypto. He also projected a staged timeline: some crypto investment options could become available in 2027, while ETFs at larger employers might follow later that same year. More widespread availability across retirement funds could expand in 2028.
He attributed the pacing to regulatory certainty changing faster than the underlying operational “plumbing.” Brites noted that White House review can take up to ninety days, after which the rule would be published and could have an effective date typically about sixty days later.
Legal protection helps, but uncertainty remains
The proposal would provide some legal safe-harbor style protection for plan managers when they make selections under the new framework. But Brites cautioned that it would not stop lawsuits entirely—employers and fiduciaries could still face legal challenges over the substance of investment decisions.
He also warned that future political shifts could reverse the rule. In his remarks, he referenced that guidance issued in 2022 was later reversed in 2025, arguing that the rule could be reconsidered again by subsequent administrations. He added that reduced judicial deference to agencies could further cloud how much weight courts would give any legal protection in later disputes.
For employers, that means the question isn’t only whether crypto can be offered under a safer framework—it’s whether the regulatory environment will remain stable long enough for them to build and maintain a compliance process for multi-year retirement plan allocations.
As the rule moves through publication and the effective-date window, investors and plan participants should watch which assets are actually approved first, whether retirement providers lean toward ETF-based structures, and how fiduciary documentation requirements are interpreted—especially for smaller cryptocurrencies where liquidity and valuation transparency may be hardest to prove.
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