US 401(k) proposal leaves door open to altcoins, but hurdles remain
While the proposal doesn’t exclude altcoins and smaller cryptocurrencies, experts say they could face challenges getting into retirement plans.
A proposed Labor Department rule could pave the way for alternative investments, including certain cryptocurrencies, in US 401(k) retirement plans. The rule, currently under final review at the White House, seeks to provide more legal protection for employers and plan managers while allowing them to offer a broader range of investment options.
While the proposal does not specify which digital assets can be included or set a minimum market capitalization requirement, it does outline six factors for retirement plan managers to consider: performance, fees, liquidity, valuation, benchmarks, and complexity.
Experts suggest that Bitcoin (BTC) and Ether (ETH) are likely to be the first cryptocurrencies offered due to their established markets and investment products. Both cryptocurrencies have significant market capitalizations - Bitcoin at approximately $1.5 trillion and Ether at $273 billion, according to CoinGecko data from Nov. 6.
However, the rule does not exclude smaller cryptocurrencies, as they could still be considered if they meet the same standards of prudence, liquidity, valuation, and investor protection as other retirement options.
Teresa Goody Guillén, managing partner at Bellementis PLLC, emphasized that while a digital asset's market cap matters, it shouldn't be the deciding factor. She stated, "Big doesn't mean suitable, and small doesn't mean disqualified." Bernardo Brites, co-founder and CEO of Trace Finance, agreed, adding that any token would need to pass a list of criteria, with Bitcoin and Ether clearly passing, while everything else fails on track record or benchmark before a fiduciary ever gets to market cap.
Experts anticipate that exchange-traded funds (ETFs) and managed funds will likely be offered before direct crypto holdings due to existing custody and recordkeeping systems. However, those risks should not automatically rule out holding cryptocurrencies directly. Brites expects crypto investments to become available gradually, with existing brokerage options likely coming first, followed by standalone ETFs and funds that include small amounts of crypto.
Some crypto investment options could become available in retirement funds by 2028, although legal uncertainty could potentially slow adoption.
Written by urgent.news from Cointelegraph's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
