Author | Bonnie Treichel
The rise of digital currencies as an investment vehicle has captured the attention of both institutional investors and retirement plan participants. In response to this growing interest, and amid the evolving regulatory landscape, the Department of Labor (DOL) issued guidance in 2022 urging plan fiduciaries to exercise “extreme care” before considering the inclusion of cryptocurrency in a retirement plan’s investment lineup. The DOL recently rescinded that guidance in Compliance Assistance Release No. 2025-01, signaling a shift back to a neutral position on digital assets in retirement plans.
Here’s What You Really Need to Know:
- On March 10, 2022, the DOL issued Compliance Assistance Release No. 2022-01, which did not prohibit, but discouraged, consideration of cryptocurrency as a retirement plan investment option.
- The DOL’s 2025 release, rescinding its 2022 guidance marks a return to the DOL’s historically neutral, principles-based approach, reaffirming that fiduciaries, and not regulators, are responsible for determining whether cryptocurrency is an appropriate investment option under the Employee Retirement Income Security Act (ERISA).
- The 2025 release is an important reminder to plan sponsors of their fiduciary obligations under ERISA when evaluating cryptocurrency as a potential investment option within retirement plans. These responsibilities, particularly the duty of prudence and care, apply uniformly across all asset classes and must be exercised with the same rigor as with any other investment decision made on behalf of the plan.
Let’s Dive In…
What Is Cryptocurrency?
Cryptocurrency is a type of digital or virtual currency that uses cryptography for security. Unlike traditional currencies issued by governments (like the U.S. dollar or euro), cryptocurrencies are decentralized, meaning they typically operate on a technology called blockchain, which is maintained by a distributed network of computers (called nodes) rather than a central authority. Some examples include:
- Bitcoin (BTC) – the first and most well-known cryptocurrency.
- Ethereum (ETH) – known for enabling smart contracts and decentralized apps (dApps).
- Others: Litecoin (LTC), Ripple (XRP), Solana (SOL), Dogecoin (DOGE), etc.
The DOL’s Position: Then and Now
Then: In March 2022, in Compliance Assistance Release 2022-01, the DOL noted that at this early stage in the history of cryptocurrencies, they had “serious concerns about the prudence of a fiduciary’s decision to expose a 401(k) plan’s participants to direct investments in cryptocurrencies” or other products whose value is tied to cryptocurrencies. It noted that these investments “present significant risks and challenges to participants’ retirement accounts, including significant risks of fraud, theft, and loss.”
It further commented that:
- Cryptocurrencies are very different from typical retirement plan investments, and “it can be extraordinarily difficult, even for expert investors, to evaluate these assets and separate the facts from the hype.”
- Cryptocurrencies are not held like traditional plan assets in trust or custodial accounts, meaning they might not be readily valued and available to pay benefits and plan expenses.
- There were concerns about the reliability and accuracy of cryptocurrency valuations.
While many shared those concerns, the concept faced a significant setback following a statement from the DOL’s Employee Benefit Security Administration (EBSA). The EBSA announced its intention to launch an investigative program targeting retirement plans that offer participants investments in cryptocurrencies and related products. The EBSA emphasized that it would take appropriate measures to safeguard the interests of plan participants and beneficiaries with respect to these investments.
Furthermore, the EBSA cautioned that fiduciaries permitting such investment options—whether directly or through self-directed brokerage windows—should be prepared to justify how their decisions align with their fiduciary duties of prudence and loyalty, especially given the risks outlined.
Despite this guidance, several large recordkeepers proceeded to offer limited cryptocurrency exposure, typically capped at a specified amount for which participants could invest (e.g., around 5%), within self-directed brokerage windows. One of those providers, ForUsAll, even filed a legal challenge contesting the EBSA’s directive.
Now: On May 28, 2025, the DOL updated its prior guidance on cryptocurrency investments in Compliance Assistance Release No. 2025-01, which rescinds its earlier 2022 guidance that cautioned against including cryptocurrency options in retirement plans. The DOL now states that their original language, the standard of “extreme care” outlined in 2022, deviated from ERISA and its traditional neutral stance on investment types.
The announcement clarified that, prior to the 2022 release, the DOL had traditionally maintained a neutral stance on specific investment types and strategies. The new guidance reaffirms this historical approach, stating that it “neither endorses, nor disapproves of, plan fiduciaries who conclude that the inclusion of cryptocurrencyi in a plan’s investment menu is appropriate”.
It further reiterated that “when evaluating any particular investment type, a plan fiduciary’s decision should consider all relevant facts and circumstances and will necessarily be context specific.” More specifically and citing the U.S. Supreme Court’s decision in Fifth Third Bancorp v. Dudenhoeffer, 573 U.S. 409 (2014), the DOL reiterated that under ERISA, fiduciaries are required to select and monitor a plan’s investment options: (1) with prudence and (2) in the best interest of participants and beneficiaries, with the exclusive purpose of maximizing risk-adjusted financial returns.
Action Items for Plan Sponsors
When considering cryptocurrency as an investment option in retirement plans, plan fiduciaries must carefully evaluate several key risks including but not limited to volatility and potential for fraud. While these concerns are important given the unique characteristics of digital assets, the standard remains one of prudence. Plan sponsors should consider these action items accordingly:
- Assess the Viability of Cryptocurrency: Considering the DOL’s evolving position, evaluate whether cryptocurrency should be offered as an investment option—either within your plan’s core investment lineup or through a self-directed brokerage window—if available.
- Engage Your Retirement Plan Advisor: Consult your advisor or consultant early in the decision-making process to evaluate the potential inclusion of cryptocurrency. Ensure they are equipped to provide informed guidance and ongoing oversight or help identify a qualified resource.
- Confirm Recordkeeper Capabilities: Verify that your recordkeeper can support the unique requirements of this asset class, including valuation, liquidity, and any plan-specific investment restrictions (e.g., limiting exposure to 5% of a participant’s total balance and monitoring rebalancing over time).
- Review Plan Documents and Investment Policy Statement (IPS): Ensure your plan documents and IPS explicitly permit cryptocurrency investments. The IPS should also include appropriate monitoring and review procedures tailored to the risks and characteristics of digital assets.
- Prepare a Communication Strategy for Participants: Anticipate employee interest or inquiries prompted by the DOL’s announcement and related media coverage.
- Reaffirm Fiduciary Responsibilities: Remember that your fiduciary duty to prudently select and monitor investment options remains unchanged. Any decision to include cryptocurrency must align with ERISA’s standards of care and the best interests of plan participants and beneficiaries.
