Retirement Plans
Digital assets in 401(k) plans
Digital assets are called out in the August Executive Order on alternative assets in 401(k)s, creating interest in the idea of cryptocurrency exposure in plan menus.
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Historically, 401(k) plan investments have focused on traditional securities such as stocks, bonds and cash equivalents, through investment vehicles like mutual funds, collective investment trusts, and separate accounts. Plan investment menus have been shaped by ERISA’s strict fiduciary standards emphasizing principles that support fiduciary care and prudent decisions for the benefit of plan participants. As a result, liquidity, transparency, and diversification have long been considered the key characteristics of investments in retirement plan investment menus.
The Trump administration Executive Order may begin to open up 401(k) plans to less traditional, alternative asset classes. This order directs the DOL and SEC to create a regulatory framework to facilitate the inclusion of funds with alternative assets in 401(k) plans. Included in the definition of alternative assets are actively managed investment vehicles investing in digital assets.1 Supporters argue that, if carefully structured, such exposure could offer diversification, long-term growth potential, and better alignment with participant preferences. Still, plan sponsors must weigh these benefits against unique risks including volatility, custody challenges, and evolving regulatory guidance. While previous articles addressed private investments, this one focuses on digital asset investment vehicles as a potential retirement plan investment option.2
What are digital assets?
What are digital assets?
Digital assets are typically referring to assets that use distributed ledger technology to facilitate decentralized transactions. Cryptocurrency is the most commonly recognized category of digital assets, representing tokens designed for peer-to-peer, blockchain-based transactions. Key examples of public digital assets include:
- Bitcoin (BTC): The most widely recognized and largest digital asset by market capitalization
- Ether (ETH): The native token for the Ethereum blockchain, which supports smart contracts and decentralized applications
- Stablecoins: Digital assets pegged to fiat currencies or commodities like gold
Unlike traditional securities, digital assets trade on a variety of centralized and decentralized exchanges and are not formally supported by most governments or central banks. Historically, they have been volatile, often experiencing double-digit percentage price swings in short periods, which presents a potential behavioral challenge for participants who may panic sell or chase returns.
For a resource providing further background information on digital assets, please see this educational primer from UBS CIO, which can be accessed here.
Common rationale from proponents
Common rationale from proponents
Even though digital asset prices can be volatile, certain institutional and retail investors have embraced them for the potential to:
- Diversify portfolios beyond traditional asset classes
- Capture potential high-growth opportunities
- Hedge against inflation and currency devaluation
Despite these potential benefits, digital assets remain controversial as investment options due to their speculative nature and regulatory uncertainty.
Important considerations for plan sponsors
Important considerations for plan sponsors
While the reasons for utilizing digital assets may be compelling, the following issues should be front and center in any assessment:
- Volatility and valuation complexity: Digital assets have exhibited dramatic price swings over relatively short periods. Given their volatility and relative novelty, creating a framework for plan sponsors to prudently evaluate digital assets is currently challenging.
- Custody and security risks: Digital assets often require separate custody arrangements and may pose heightened cybersecurity exposure.
- Liquidity and participant access expectations: 401(k) plans are designed for daily trading, participant redemptions or transfers. Some digital asset investment structures may introduce restrictions on withdrawals in periods of market turbulence.3
- Fee structure and transparency: Some digital asset funds have higher expense ratios, less transparent fee models or limited benchmarking compared to traditional funds.
- Operational and recordkeeper readiness: Plan administrators and recordkeepers may need to upgrade systems to support custody, valuation, withdrawal/redemption logistics, and participant disclosures.
- Participant education and suitability: Given the complexity and novelty of digital assets, ensuring participants understand the investment, risk characteristics, and how it fits in their portfolio is critical from a fiduciary perspective.
Even outside the tightly regulated realm of 401(k) plans, individual investors should consider the unique risks associated with crypto and digital assets. For further viewpoints on this, please consult UBS CIO’s August 20, 2025 publication “Digital Assets 101: Crypto in a portfolio context,” which can be found here.
Regulatory context: shifting guidance and fiduciary implications
Regulatory context: shifting guidance and fiduciary implications
In March 2022, the U.S. Department of Labor (DOL) issued Compliance Assistance Release No. 2022‑01, warning fiduciaries to exercise “extreme care” before adding cryptocurrency options to 401(k) plans. The guidance cited risks such as fraud, theft, valuation uncertainty, complexity, participant understanding, and recordkeeping challenges.4 This created a strong regulatory caution around digital asset exposure in retirement plans.
On May 28, 2025, the DOL rescinded that guidance through Release No. 2025‑01, stating the prior language departed from its historically neutral approach. The new stance clarifies that the DOL will neither endorse nor oppose crypto in 401(k) plan investment menus, while reaffirming that fiduciary duties under ERISA remain unchanged.5 This reduces the regulatory overhang but does not lessen fiduciary responsibility.
Further signaling a policy shift, an Executive Order signed on August 7, 2025, directs the DOL and SEC to review fiduciary standards for funds with alternative assets (including digital assets), explore safe harbors to reduce litigation risk, and consider revising accredited investor rules for broader access. The order also emphasizes that any digital asset exposure should be embedded in actively managed vehicles, reinforcing the need for professional oversight rather than participant self-selection. While this sets a regulatory process in motion, it does not automatically permit digital assets in all plans.
Industry response: emerging structures for digital assets in retirement plans
Industry response: emerging structures for digital assets in retirement plans
To serve plan sponsors, asset managers, recordkeepers, and custodians are piloting retirement-friendly structures for digital assets and other alternative investments. To manage risk and leverage scale, digital assets exposure can be housed within pooled structures. Experts suggest that ETFs offer the best structure for digital assets, given their liquidity, transparency, and regulatory oversight. Also, recordkeepers are evaluating systems for daily valuation, trading, reporting, and liquidity to ensure operational readiness that aligns with 401(k) standards.
Another approach that plan sponsors may consider is offering additional investment flexibility and access to digital asset vehicles through Self-Directed Brokerage Accounts (SDBAs). SDBAs allow participants to access a broader universe of investments beyond the core investment menu and in some cases, may include digital asset-linked products depending on the brokerage provider’s capabilities. While SDBAs shift more responsibility to participants, fiduciary oversight still applies particularly around disclosures, education, and monitoring of the brokerage provider. 6
Despite these developments, widespread adoption remains limited. Many large recordkeepers and platforms are still evaluating key factors such as timing, cost, governance, and participant impact before moving toward full integration.
What’s next?
What’s next?
Mainstream adoption of digital assets in 401(k) plans will require clearer regulatory guidance, secure custody and cybersecurity infrastructure, additional product development, and strong participant education. While the regulatory tone has softened, with the DOL easing earlier caution and federal signals supporting more access, plan sponsors should prioritize process and prudent decision making, which includes evaluating appropriateness in light of participant demographics, understanding investment vehicles, documenting fiduciary processes, and implementing effective participant communications.
For more information on Retirement Plan Services, please visit our website.
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