President Donald Trump signed a decree on August 7, authorizing the crypto in the 401 retirement plans (K). The cryptography industry has qualified the victory move for adoption, but investment professionals warn that it has a significant risk.
The order “democratizing access to alternative assets for 401 (K) investors” ordered American financial regulators to extend access to crypto and private companies in plans 401 (K).
The investment program sponsored by employees 401 (K) is one of the most popular retirement plans in the United States. In 2024, plans 401 (K) held 8.9 billions of dollars in assets. As such, it would represent a huge source of demand for cryptocurrencies and could send prices on the arrow.
Crypto merchants can see movement as a bullish signal for new price peaks, but finance professionals and market observers say that there are significant risks.
What risks is the risks for investors 401 (K)?
The order of Trump opens investment roads which were previously locked in the most popular retirement plan in America, ordering the US Labor Department to reassess the restrictions on six groups of different assets:
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Investment capital
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Real estate (including debt instruments guaranteed by real estate)
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Crypto investment products that are actively managed
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Goods
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Infrastructure Development Financing Projects
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Risk of longevity sharing pools.
Industry observers have claimed that more capital entering the cryptographic markets will increase the prices of cryptography. André Dragosch, head of European research at Crypto Asset Manager Bitwise, told Cintelegraph in a “chain reaction” program on X that it could see the Bitcoin prize spending $ 200,000 by the end of the year.
Does Bitcoin go for a peak of 2025? Or is the 4-year cycle dead? https://t.co/dckfjvkjix
– Cointtelegraph (@cointelegraph) August 18, 2025
CJ BURNETT, Director of Compass Mining income, told Cintelelelegraph: “The increased adoption of Bitcoin in 401 (K) unlocks a large passive capital and investment flow basin that stimulates stability and reduce the volatility of the asset.”
A 401 (K) is a retirement savings plan sparked by the employer in the United States which allows employees to contribute part of their income, often partly twinned by an employer, to be invested in various funds. 401 (k) s are often sent by tax or tax advantages.
401 (K) s can be good for crypto, but finance professionals are not as certain that crypto will be good for 401 (K).
A problem that concerned observers was the high costs associated with some of these alternative investments. According to investment Company Institute (here), most of the 401 Plan (K) assets have an average fees of only 0.26%, while investment capital generally uses a structure “2 and 20”, in which managers receive overall costs of 2% and 20% of yields.
Philitsa Hanson, responsible for products, actions and administration of funds at Allvue Systems, said: “I don’t think people speak enough about the potential for higher costs.”
The executive decree “raises more questions than answers,” continued Hanson. “Someone should be very thoughtful about how these types of assets can be incorporated.”
Bitcoin funds (BTC) negotiated on the stock market (ETF) generally benefit from costs comparable to the average here, although certain major aberrant values, such as Proshares Bitcoin Strategy Etf, Valkyrie Bitcoin and Etf Et Etf and Grayscale Bitcoin Trust ETF, have 0.95%, 1.24%and 1.50%, The costs also do not include other aspects affecting profitability, such as liquidity and commercial costs.
In relation: The Michigan retirement fund deepens the Bitcoin exhibition with a participation of $ 11 million in Ark ETF
Ary Rosenbaum of the law firm Rosenbaum wrote that Bitcoin is far too volatile to be included in a 401 (K): “When Bitcoin drops 40% in a week – and it will be – the lawyers of the complainants will hit.” Why did you offer such a risky active? “What reasonable diligence have you played?” “Where was risk disclosure?” »»
He described Crypto as “fiduciary mines field”. It contains complex mechanisms such as stain, forks and airfalls and has a complex tax treatment. “Suddenly, you have built a nightmare in the education of participants.”
Margaret Rosenfeld, legal director of the Everstake ignition supplier, told Cintelegraph: “The biggest risks are familiar for any investment: market volatility, cybersecurity and trustee exhibition.”
“That said, these risks are not insurmountable.”
401 (k) Plans need “plumbing upgrade”
Rosenfeld said that updates to regulations and advice around 401 (K) could alleviate most of the associated risks. First, she suggested creating a clear standard for what could be considered a “prudent” digital asset.
She said that the 1974 employee retirement income security law, which regulates what should be included in retirement plans, “was built for stocks and obligations, not blockchains”.
Rosenfeld has recommended an “upgrade to plumbing the pension system”, declaring: “The file holding systems which feed 401 (K) are not designed for forks, gluées or volatility in real time. We need digital platforms practiced by assets following all onchain events automatically. ”
She also said that regulators should define liquidity, transparent pricing, police and cybersecurity marks to ensure that certain digital assets are “retired”, including independent risk ratings.
“Managed properly, the crypto in 401 (K) could diversify retirement portfolios and bring greater transparency to a space that has often operated outside institutional surveillance,” said Rosenfeld.
But many depends on the management of the crypto correctly. Rosenbaum has written that crypto can be a precious addition to a retirement portfolio, because it ensures diversification, coverage against inflation and “exposure to financial innovation”. However, it does not belong to a 401 (K).
“Use a brokerage account. Use a Roth Ira with a self -diairige option.
Rosenbaum wrote that, as things arise, crypto is not a viable asset for 401 (K). “It is a brilliant object, and the pursuit of participants – and sponsors – at unnecessary risks. A conservative allowance of 1% to 5% does not solve the fundamental problem: volatility and complexity do not mix with retirement plans. ”
The Trump administration’s decision to loosen the 401 (K) requirements, repeats a model in recent legislation in which user protection and systemic risks take a rear seat to stimulate the adoption of cryptography and the digital asset industry. The integration of crypto into the traditional financial system has not been tested in stress and the results are unpredictable.
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This article does not contain investment advice or recommendations. Each investment and negotiation movement involves risks and readers should conduct their own research when they make a decision.