Last week, U.S. President Trump signed an executive order that opens the door for retirement accounts like 401(k)s to invest in alternative assets such as cryptocurrencies and private equity funds for the first time. This so-called "disruptive" move could expose trillions of dollars in retirement funds to higher risks and greater opportunities—supporters call it a chance for asset allocation diversification, while critics warn that high volatility and regulatory uncertainty could threaten the retirement security of ordinary investors. Will this gamble on the future of U.S. pensions become a new blue ocean of wealth or a deep abyss of risk?

The U.S. 401(k) retirement account is an employer-sponsored defined contribution retirement savings plan that allows employees to deposit income into the account through payroll deductions, enjoying tax-deferred or after-tax (Roth) benefits, while many employers also provide matching contributions. Participants typically can choose to invest in mutual funds, stocks, bonds, and other assets to accumulate retirement savings. As of the first quarter of 2025, the asset size under such plans reached approximately $9 trillion.

The history of this system dates back to 1974, when the Employee Retirement Income Security Act (ERISA) established the legal framework and fiduciary standards for retirement plans. In 1978, the Tax Reform Act of 1978 first introduced the "401(k)" provision into U.S. tax law, allowing employees to defer taxes on a portion of their income, creating a tax-advantaged savings mechanism. In 1980, retirement benefits consultant Ted Benna created and implemented the first practical 401(k) plan, and the IRS issued clear rules in 1981, promoting its widespread adoption. Since then, the 401(k) has gradually replaced traditional pension plans, becoming the most commonly used employer-sponsored retirement savings method in the U.S.

In recent years, the U.S. Congress has continued to pass reforms to improve the system. The SECURE Act of 2019 strengthened the retirement savings system, expanded opportunities for small businesses to participate, adjusted the minimum distribution age, and provided annuity product options for older individuals. The SECURE 2.0 Act passed in 2022 further increased flexible mechanisms such as automatic enrollment, catch-up contributions, and emergency withdrawals, encouraging savings and diversified use.

Although the signing of the executive order has paved the way for 401(k) and other retirement accounts to invest in cryptocurrencies and private equity funds, its implementation still requires detailed rules from multiple departments.

First, the U.S. Department of Labor (DOL), as the core regulatory agency for employer-sponsored retirement plans, will determine how plan fiduciaries fulfill the prudent duty and diversification principles required by ERISA when selecting high-risk assets like cryptocurrencies and private equity funds, and may require additional risk disclosures and suitability assessments.

Second, the U.S. Securities and Exchange Commission (SEC) needs to set standards for the issuance, trading, and information disclosure of digital tokens, private equity, or debt products that involve securities attributes to prevent fraud, manipulation, and conflicts of interest. The Internal Revenue Service (IRS) is responsible for clarifying the tax treatment of these assets, including income recognition, valuation methods, and reporting requirements, to avoid tax disputes arising from significant price fluctuations.

Additionally, the trading of certain derivatives of crypto assets may fall under the regulatory scope of the Commodity Futures Trading Commission (CFTC). Therefore, due to the involvement of cross-sector regulation, the speed and details of this policy's implementation will depend on the coordination efficiency among multiple agencies.

As of the end of the first quarter of this year, the total assets in U.S. 401(k) plans amounted to approximately $8.7 trillion, while the total asset size of the entire U.S. retirement market (including 401(k) and IRAs) reached as high as $43.4 trillion. Although there is no clear figure on how much funding will be allocated to the cryptocurrency sector, there are some assumptions and predictions within the industry.

Tom Dunleavy, the venture capital director at Varys Capital, suggested: "If every American's 401(k) account allocates 1% of existing assets to cryptocurrencies, that would bring $120 billion into the crypto market. If it's 3%, that's $360 billion; at 5%, it could reach $600 billion."

It is worth noting that this influx of funds is long-term and stable—most Americans automatically deduct a portion of their wages every two weeks into their 401(k) accounts, and once digital assets are included in the investment portfolio, it means continuous passive buying.

For a highly volatile market, this is not just an injection of funds but also a stabilizing agent for sentiment.

At the same time, Ryan Rasmussen, research director at Bitwise, pointed out: "In the short term, this executive order sends a signal to the market: crypto assets have moved from the margins to institutional recognition."

Considering the safety of funds and market acceptance, in this wave of positive signals, larger market cap and mature ecosystem cryptocurrencies will undoubtedly become the preferred beneficiaries:

Bitcoin

Bitcoin (BTC), as the largest and most institutionally recognized crypto asset, is highly likely to become the preferred choice for retirement accounts. Its "digital gold" attribute and relatively mature market position make it a core asset for retirement fund allocation. Many institutional funds have already included BTC in their portfolios, and future inflows will further enhance its market position.

Ethereum

Ethereum (ETH), as the leader in decentralized applications and smart contract platforms, has a vast ecosystem and is transitioning to a proof-of-stake (PoS) mechanism. The rise of liquid staking service platforms like Lido also provides convenient participation paths for institutional investors. ETH is likely to become the second-largest beneficiary.

Major DeFi Tokens and Stablecoins

With 401(k) plans allowing investments in private equity and alternative assets, some high-quality DeFi project tokens (such as LDO, AAVE, UNI) and stablecoin assets may also receive more attention, especially in terms of asset diversification and risk management needs, as these tokens provide additional yield and liquidity guarantees.

The executive order signed by Trump has opened a historic window for U.S. 401(k) and other retirement accounts to invest in cryptocurrencies and private equity funds, marking a gradual move towards the institutionalization of crypto assets. Although this initiative brings potential inflows of hundreds of billions of dollars, the crypto market may gain more stable funding support and sentiment backing, but its implementation still requires the DOL, SEC, IRS, and other regulatory agencies to collaboratively develop detailed rules to ensure that investment risks are controllable. Bitcoin and Ethereum, with their large market caps and mature ecosystems, will undoubtedly emerge as the biggest winners, while high-quality DeFi tokens and stablecoins may also benefit.

In the future, how to balance the opportunities brought by innovation with the security of retirement funds will become a key issue for regulators and the market to address together.

Related: White House: Trump Will Allow U.S. 401(k) Retirement Plans to Invest in Cryptocurrencies

Original: “Crypto Assets Storm Retirement Accounts, Is 401(k) Becoming a New Wealth Engine?”

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