Tax Byte

DOL Rescinds 2022 Crypto Restrictions in 401(k) Plans

Mark Seid, EA, CPA, USTCP & Alice Orzechowski, CPA, CMA, EA

The Department of Labor has eliminated its Biden-era warning against cryptocurrency in 401(k) plans, returning to a neutral regulatory stance. While this opens the door for more crypto options, fiduciary duties remain unchanged and plan sponsors still face significant liability risks.

On May 28, 2025, the Department of Labor issued Compliance Assistance Release No. 2025-01, formally rescinding the 2022 guidance that effectively discouraged cryptocurrency investments in 401(k) retirement plans.

The 2022 Guidance: A Cautionary Approach

The original Compliance Assistance Release No. 2022-01, issued March 10, 2022, directed plan fiduciaries to exercise “extreme care” before adding cryptocurrency options to 401(k) investment menus. The Biden administration’s DOL cited several concerns:

Volatility and Speculation: The guidance highlighted cryptocurrency’s extreme price volatility and speculative nature, warning of “devastating impact on participants, especially those approaching retirement.”

Participant Knowledge Gaps: The DOL expressed concern that plan participants lacked sufficient expertise to make informed decisions about crypto investments compared to traditional assets.

Operational Challenges: Issues included custodial difficulties (digital wallets, password security), recordkeeping complexities, and unreliable valuation methods.

Fraud and Theft Risks: The guidance pointed to widespread incidents of theft, fraud, and exchange failures in the cryptocurrency market.

The 2022 release also warned that plans offering crypto options should “expect to be questioned about” these decisions during DOL investigations.

The 2025 Reversal: Return to Neutrality

Secretary of Labor Lori Chavez-DeRemer framed the rescission as correcting regulatory overreach, 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 new guidance emphasizes that the DOL is “neither endorsing, nor disapproving of, plan fiduciaries who conclude that the inclusion of cryptocurrency in a plan’s investment menu is appropriate.” This represents a return to the department’s historically neutral approach to investment types and strategies.

Scope of Digital Assets Covered

Importantly, the 2025 guidance applies broadly to “cryptocurrencies” and extends to “a wide range of digital assets” including those marketed as “tokens,” “coins,” “crypto assets,” and any derivatives thereof. This comprehensive scope means the regulatory change affects various forms of digital investments beyond traditional cryptocurrencies like Bitcoin and Ethereum.

What Hasn't Changed: ERISA Fiduciary Duties

Despite the regulatory shift, plan fiduciaries remain subject to ERISA’s exacting standards. The 2025 guidance explicitly states that fiduciary decisions must still “consider all relevant facts and circumstances” and be “context specific.”

Core Fiduciary Obligations Remain:

Prudence: Acting with the care, skill, and diligence of a prudent expert
Loyalty: Acting solely in participants’ financial interests
Diversification: Ensuring appropriate portfolio diversification

No Safe Harbor: Critically, the DOL provides no safe harbor protection for fiduciaries who add crypto options. Plan sponsors remain personally liable for losses resulting from fiduciary breaches.

Looking Forward

The DOL’s policy reversal aligns with the Trump administration’s stated goal of making the U.S. the “crypto capital of the world.” However, the absence of specific regulatory endorsement means plan fiduciaries must navigate crypto decisions without federal backing.

Tax professionals should counsel retirement plan clients that while regulatory barriers have decreased, the fundamental fiduciary analysis remains rigorous. The question isn’t whether crypto is now “allowed” in 401(k) plans – it always was under ERISA’s general prudence standards – but whether fiduciaries can demonstrate that including crypto serves participants’ best interests given all relevant circumstances.