On March 11, the United States Department of Labor warned employers that sponsor 401(k) retirement plans to “exercise extreme care” when dealing with cryptocurrencies and other digital assets, even threatening to pay extra legal attention to retirement plans with significant crypto investments.
Its rationale is familiar to any crypto investor: The risk of fraud aside, digital assets are prone to volatility and, thus, may pose risks to the retirement savings of America’s workers. On the other hand, we are seeing established players in the retirement market taking steps toward crypto. For one, retirement investment platform ForUsAll decided last year to implement crypto as an investment option for 401(k) fixed retirement accounts in partnership with Coinbase (NASDAQ:COIN). Is this the beginning of a larger trend?
Why even bother?
What the law says: 401(k)s, the ERISA and IRAs
- “You can (if available from your employer) use a self-directed 401(k) to invest in alternative investments like cryptocurrencies. A simple Google (NASDAQ:GOOGL) search turns up at least one alternative to ForUsAll: BitWage. Many firms are working on ETFs, too (like Vanguard and SkyBridge Capital), although the Securities and Exchange Commission is not yet approving any. There are Bitcoin futures investment options approved by the Commodity Futures Trading Commission.”
- “You can invest in a long list of publicly traded companies that own crypto, like MicroStrategy, Tesla (NASDAQ:TSLA), Coinbase, Block, PayPal (NASDAQ:PYPL), Marathon Digital Holdings and Nvidia (NASDAQ:NVDA). I have done this. Of course, these companies have other business objectives, so you have to be ‘on board’ with whatever those objectives are.”
- “You can invest through your 401(k) plan in trusts, like Grayscale Investments’ Bitcoin trust and Ether trust (both of which I have invested in). This is easy, and they are like unit trusts or money market funds — you buy a ‘unit’ of a trust, which is completely liquid, rather than a fractional interest in a particular cryptocurrency.”