US 401(k) Rule Proposal Does Not Limit Cryptocurrency Types; Altcoins Still Face Obstacles to Inclusion in Retirement Plans

Odaily: The U.S. Department of Labor's proposed rule allowing 401(k) retirement plans to allocate to alternative assets such as cryptocurrencies was submitted to the White House Office of Management and Budget (OMB) on Thursday for final review.

The proposal aims to streamline the process for retirement plans to allocate to alternative investments and provide certain legal protections for employers and plan administrators. The proposal published by the Department of Labor in March does not limit the types of digital assets that may be included, nor does it set a minimum market capitalization threshold, but it requires plan administrators to assess investment risks across six dimensions: performance, fees, liquidity, valuation, benchmarks, and complexity.

Teresa Goody Guillén, managing partner at Bellementis PLLC, said that Bitcoin and Ethereum may be the first to gain adoption due to their relatively mature markets and investment products, but altcoins are not automatically excluded and still need to meet requirements such as prudent investment, liquidity, valuation, and investor protection.

Bernardo Brites, co-founder and CEO of Trace Finance, noted that some small-cap tokens may struggle to meet historical performance and benchmark evaluation requirements.

In addition, the proposal does not require crypto investments to be made through ETFs or managed funds, but Guillén expects that such investment products may enter 401(k) retirement plans before direct holdings of cryptocurrencies.