President Donald Trump is set to sign an executive order that would allow Americans to invest in crypto assets through their 401(k) and IRA retirement plans. If successfully signed, the initiative will expose the $9 trillion United States retirement market to digital assets, including Bitcoin and Ether.
A 401(k) is an employer-sponsored retirement plan with higher contribution limits and potential employer matching contributions. On the other hand, an IRA (Individual Retirement Account) is a self-directed retirement account offering flexible investment options and tax benefits. Interestingly, both offer tax advantages for retirement savings.
U.S. Retirement Market to Adopt Crypto
The order directs federal regulators to review and remove barriers that currently restrict the inclusion of digital assets in tax-advantaged retirement accounts. Interestingly, gold and private equity are also among the list of other non-traditional investments that will be reviewed.
The move builds on the administration’s earlier reversal of Biden-era guidance that discouraged crypto options in 401(k) plans, aiming to adopt a “neutral stance” toward the digital assets. Notably, the guidance warned that the adoption of crypto should be cautious.
If signed, the executive action could increase crypto adoption in mainstream finance by embedding it into everyday savings vehicles. However, it’s noteworthy that most retirement investors rely on plan sponsors to act in their best interests. As a result, the pace of crypto adoption in retirement plans will largely depend on whether these fiduciaries see value in it.
Different Reactions from Industry Players
Tolling that line, David Rosenstock, a Certified Financial Planner (CFO) and founder of Wharton Wealth Planning, recommends that investors consider small allocations (1-2%). While he cited the volatility of crypto assets, another financial expert pointed out that investing in crypto will be subject to capital gains tax.
Nonetheless, institutional players are already preparing for this potential influx of capital. Media outlet FT reported that major firms such as Vanguard, BlackRock, and Fidelity are in discussions to offer expanded retirement products that deliver crypto exposure. The moves signal their readiness to capture interest once the executive order is official.
Pension Funds are Interested in Crypto
Michigan’s State Retirement System, managing approximately $3.2 billion in assets, disclosed that it has allocated around $6.6 million to purchase 110,000 shares of Bitcoin ETFs. The move makes it the third U.S. state pension fund to invest in Bitcoin via ETFs.
Meanwhile, Florida Chief Financial Officer Jimmy Patronis has formally requested that the State Board of Administration evaluate adding Bitcoin to its pension fund portfolio. He describes Bitcoin as “digital gold” and has urged the board to consider a pilot allocation.
