A proposed rule would allow wealthy investors to unload crypto assets at the expense of average Americans.
Last year, President Donald J. Trump issued an executive order calling for policies that allow everyday Americans to invest in private equity funds, crypto assets, and other “alternative assets” through their retirement plans. In response, the U.S. Department of Labor recently proposed a rule designed to protect retirement plan administrators from claims that they failed to satisfy their fiduciary duties to plan beneficiaries by adding these assets to 401(k) plans.
But crypto assets have no place in the 401(k) plans of hardworking Americans. The Labor Department should instead revert to the sensible guidance it issued in 2022, which urged plan fiduciaries to exercise extreme care before adding a cryptocurrency option to a 401(k) plan’s investment menu.
The Trump Administration has indicated that everyday American investors want the “competitive returns and asset diversification” associated with crypto asset investment options. But in reality, everyday investors are far from clamoring for crypto assets to be included in their 401(k) plans.
Recent polling shows that the vast majority of Americans distrust crypto and want little to do with it. As Politico reported, “voters are broadly skeptical of the crypto industry,” and “industry lobbying and political spending—not voter attitudes—have driven the major surge in focus on crypto policymaking in recent years.”
Politico’s findings are consistent with earlier Pew Research Center polling in 2024, which found that “roughly six-in-ten Americans (63%) say they have little to no confidence that current ways to invest in, trade or use cryptocurrencies are reliable and safe.” Only 5 percent of adults said that they were extremely or very confident in cryptocurrencies.
What the Labor Department’s proposed rule really looks like is a strategy to create a market for investments that financial institutions and wealthy individuals, who bought into crypto early and now want out, have been struggling to offload. It is frankly immoral for the Labor Department to encourage the use of hardworking Americans’ 401(k) plans as dumping grounds for assets that early speculators no longer want.
Because most crypto assets have nothing to back them, “bagholders”—investors who continue to hold an asset even through declines in price—have always been essential to their existence. Unless an everlasting supply of new money can be drawn into buying these crypto assets, their prices will start to go down whenever large holders, known as “whales,” cash out.
Research from the Bank for International Settlements found that in the period from August 2015 to December 2022, the majority of Bitcoin investors lost money and “larger investors probably cashed out at the expense of smaller holders” In addition, the “miners” who process crypto transactions get to decide the order in which these transactions are processed, and whales will sometimes pay these miners to let them trade ahead of the small investors. Everyday investors will inevitably lose out in what is essentially a zero-sum game.
More fundamentally, why would notations on a spreadsheet—which is all most crypto assets are—be valuable without anything real backing them? The industry offers several explanatory narratives, but none of them withstand scrutiny.
One narrative stipulates that crypto is valuable because it is useful as a form of money. Money needs to maintain a relatively stable value, but the stability we prize in money is no good for an investment where the appeal lies in its ability to appreciate in value. So crypto cannot be both money and an investment, and that narrative falls apart.
