The U.S. Department of Labor made a significant announcement on Wednesday by rescinding its 2022 directive that cautioned retirement plan fiduciaries against offering cryptocurrency as an investment option in 401(k) plans. The department labeled the previous guidance as a deviation from established legal standards under the Employee Retirement Income Security Act (ERISA).
In a move to rectify this deviation, the Employee Benefits Security Administration issued Compliance Assistance Release No. 2025-01, officially withdrawing the 2022 release that had advised fiduciaries to exercise “extreme care” before considering cryptocurrency offerings. The department clarified that the language in the previous guidance was inconsistent with ERISA and represented a departure from its historically neutral approach to investment types.
Secretary of Labor, Lori Chavez-DeRemer, expressed disapproval of the previous administration’s interference in investment decisions, stating, “The Biden administration’s Department of Labor made a choice to put their thumb on the scale. We’re rolling back this overreach and making it clear that investment decisions should be made by fiduciaries, not D.C. bureaucrats.”
The 2022 guidance had cautioned fiduciaries that offering cryptocurrency in retirement plans could attract regulatory scrutiny and that they should be prepared to justify how such options aligned with their duties of prudence and loyalty. This warning was issued amidst concerns about the volatility and newness of digital assets.
The Labor Department has now reaffirmed its “neutral stance” and emphasized that it will not take a position for or against fiduciaries who determine that cryptocurrency is suitable for a plan’s investment menu. The department reiterated that investment decisions should be evaluated on a case-by-case basis, echoing the U.S. Supreme Court’s standard in Fifth Third Bancorp v. Dudenhoeffer.
While the withdrawal does not guarantee regulatory approval of cryptocurrency in retirement plans, it signifies a return to evaluating all investment options through the same fiduciary lens, without singling out any particular asset class for heightened scrutiny.
Overall, the rescinding of the 2022 directive by the Department of Labor marks a significant shift in approach towards cryptocurrency investments in retirement plans, promoting a more balanced and neutral evaluation of all investment options available to fiduciaries.