US authorities have allowed pension contributions to be invested in cryptocurrencies

What’s new? The US Department of Labor has officially rescinded guidance issued under the Biden administration in 2022 that restricted the inclusion of cryptocurrency in 401(k) retirement plans, urging fiduciaries to be “extremely cautious.” The move could give investment firms more flexibility to include digital assets in retirement investments.

Press release

What else is known?

“We’re rolling back this overreach and making it clear that investment decisions should be made by fiduciaries, not D.C. bureaucrats,” said US Secretary of Labor Lori Chavez-DeRemer.

The department under Biden has actively criticized the practice of promoting the investment of pension contributions in cryptocurrencies. At the time, the agency said cryptocurrencies posed “significant risks and challenges” because of their “speculative and volatile” nature.

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Michael Saylor’s Strategy, which is the largest holder of bitcoin among publicly traded companies, allowed employees to invest retirement savings in cryptocurrency back in 2022.

At the same time, crypto investments for pension plans were proposed by asset manager Fidelity, but the Department of Labor criticized the initiative because of the high volatility of digital assets.

Its position was supported by Democratic Senators Elizabeth Warren, Tina Smith and Dick Durbin, who called investing in cryptocurrencies a “risky and speculative gamble” that jeopardizes “millions of Americans’ retirement savings.”

Former Treasury Department chief Janet Yellen also opposed such initiatives: she insisted that Congress should regulate what assets can be included in tax-advantaged retirement programs such as 401(k).

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Despite the criticism, the Fairfax County Police Pension System in Virginia invested in the VanEck crypto fund at the same time. ForUsAll, a platform that specializes in investing pensions from 401(k) accounts in cryptocurrency, sued the Department of Labor and its head, Martin Walsh, in an attempt to overturn the guidance discussed in this article.

At the end of 2022, a CFA Institute study found