Logos of the main cryptocurrencies Bitcoin, Ethereum, Binance, Cardano, Ripple, Dogecoin, Tether, Solana, Polkadot.
While President-elect Donald Trump has pledged to make the United States the “cryptocurrency capital of the world,” cryptocurrency assets currently make up only a small portion of 401(k)s, according to the he government watchdog agency, the Government Accountability Office (GAO).
While some 401(k) plans now offer the option to invest in crypto assets like bitcoin – and amid growing concerns from the Employee Benefits Security Administration about the risks associated with investing in crypto assets, the GAO recently investigated the prevalence of crypto assets in the 401(k) market.
Crypto assets in 401(k) plans have particularly high volatility and their returns can carry “considerable risk,” according to GAO report, 401(k) Plans: Industry Data Shows Low Asset Utilization cryptocurrencies by participants although DOL data limitations persist However, cryptocurrencies only encompass less than 1% of defined contribution (DC) plans.
The investment represented significantly less than 1% of the 401(k) market, whether measured by plans, participants or assets.
“While all investments carry risks, our analysis shows that investing in certain crypto assets is particularly volatile. The potential for high returns may come with significantly high risk,” according to the report released Dec. 4, in response to a request from Rep. Richard Neal, Democrat of Massachusetts, who is the ranking member of the House. Committee on Ways and Means.
“Defined contribution plans are a key part of our three-pillar retirement savings system, with millions of Americans investing billions in savings for a secure future,” said Rep. Neal, in response to the report . “As markets evolve and new investment vehicles emerge, it is the responsibility of the federal government to provide adequate oversight. Today’s report shows that there is still much work to do to protect American workers and their retirement savings from the volatile and high-risk environment associated with cryptocurrencies.
“The crypto market, since it began to emerge as a 401(k) investment option for some retirees and investment companies in 2022, has not been fully subject to oversight and regulation appropriate.”
The Department of Labor still does not have the data needed to systematically measure crypto assets in 401(k) plans, according to the report. “DOL guidance indicates that 401(k) fiduciary responsibility does not change when crypto assets are offered as investment options. ERISA requires fiduciaries to be careful in selecting and monitoring the core investment options of their 401(k) plans, including investment options in crypto assets.
DOL officials told GAO that they generally have not required fiduciaries to screen and monitor all options offered outside of this core, consistent with ERISA fiduciary standards.
The lack of comprehensive data, along with regulatory uncertainty previously identified by GAO, limits federal oversight of participants’ investments in crypto assets in 401(k) plans.
“As a result, as this report highlights, this presents a particularly high risk for retirees. Americans need to be confident that their investments are secure and do not face unnecessarily high risks of volatility, cybersecurity and theft,” Neal said.
