Executive Order Could Open Doors for Crypto Investment
The recent executive order issued by President Donald Trump on August 7, which permits the inclusion of cryptocurrencies in 401(k) retirement plans, is being hailed as a groundbreaking step towards mainstream acceptance of digital currencies. However, industry experts caution that investors may experience delays in seeing any tangible changes due to various regulatory and administrative obstacles. The directive instructs agencies like the U.S. Department of Labor (DOL) to revise regulations under the Employee Retirement Income Security Act (ERISA), which governs retirement plans and mandates that employers prioritize their employees’ best interests.
The DOL previously nullified a guidance letter from the Biden administration in May that had effectively barred U.S. retirement plans from incorporating cryptocurrency investments. Traditionally, the majority of retirement plans for American workers consist of stocks and bonds, making the potential addition of cryptocurrencies a significant shift. Nonetheless, modifying ERISA regulations and developing new investment options is a complicated and protracted endeavor, according to experts. John Crossman, managing principal at Vex Securities, indicated that the immediate impact on the demand for cryptocurrencies is likely to be minimal due to these complexities.
Crossman explained that in typical situations, such as employer-sponsored 401(k) plans, the employer bears responsibilities under ERISA, which may deter the inclusion of cryptocurrency options in investment choices. He noted that most employers delegate the administration of their retirement plans to large financial institutions that provide established investment alternatives tailored to meet the retirement needs and risk profiles of employees. Crossman further pointed out that this development, unlike the recent approval of Bitcoin exchange-traded funds (ETFs), is “unlikely to generate new investment inflows.”
Potential for Significant Capital Influx
On the other hand, some experts believe that the volume of new capital that could flow into cryptocurrencies and private equity via 401(k) plans is substantial. Mauricio Di Bartolomeo, co-founder of Ledn, highlighted that by the third quarter of 2024, U.S. 401(k) plans are expected to hold approximately $8.9 trillion in assets, representing about 9-11% of the total market capitalization of U.S. stocks. “This unlocks a massive wave of capital for potential investments in Bitcoin and other alternative assets, further legitimizing this asset class,” Di Bartolomeo stated. He emphasized that it is becoming increasingly accessible for investors from all backgrounds to purchase or engage with Bitcoin, and this momentum shows no signs of abating.
Di Bartolomeo also anticipates that more governments will follow the U.S. in making Bitcoin more accessible to their domestic investors. As of now, Bitcoin trades around $121,140, boasting a market capitalization exceeding $2.38 trillion. Tom Bruni, vice president of community at Stocktwits, shared Di Bartolomeo’s sentiment, suggesting that this initiative could unlock trillions of dollars more for the cryptocurrency sector, both directly and indirectly. He noted that total U.S. retirement assets reached $43.4 trillion by the end of the first quarter of 2025, with $12.2 trillion (approximately 28%) allocated to defined contribution plans like 401(k)s and 403(b)s. Bruni pointed out that this figure is roughly three-quarters of the $16.8 trillion market size of U.S. individual retirement accounts.
Bruni emphasized that certain account providers still impose restrictions on exposure to cryptocurrencies, even through ETFs and other conventional investment vehicles. He added that this executive order, which broadens access to cryptocurrencies through additional retirement plans, is likely to compel reluctant providers to permit investors to access cryptocurrencies via their accounts, or risk losing competitive ground. This order aligns with other recent pro-cryptocurrency initiatives from the Trump administration, including a separate executive order aimed at combating financial discrimination against cryptocurrency users. Additionally, last week, the U.S. Commodity Futures Trading Commission (CFTC) announced plans to initiate trading of spot cryptocurrency asset contracts on futures exchanges registered with the agency.
