Trump executive order allows cryptocurrency 401(k) retirement funds

President Donald Trump has signed an executive order to make it easier to include cryptocurrencies in Americans’ 401(k) retirement funds. It was a potential risky move that was criticized by financial experts.

Trump’s new executive order announced Thursday directed the U.S. Department of Labor (DOL) to re-check investments in alternative assets such as cryptocurrencies, real estate and private equity. Trump’s order further directs the Securities and Exchange Commission (SEC) to amend regulations and guidance to facilitate such alternative asset investments.

In short, this means the U.S. government may soon overhaul the regulations to help crypto investments of 401(k) funds. cryptocurrency prices surged after Trump’s executive order, which investors expect will lead to widespread adoption of the currency.

While the 401(k) plan does not explicitly ban investment in cryptocurrencies, in 2022, DOL warned that those considering doing so should “impose extreme care.” DOL expressed “serious concern” about the wisdom of such investments, warning of a range of harms associated with cryptocurrencies, including the highly speculative, very volatile assets, and problems with record keeping and valuation.

The Trump administration subsequently canceled the guide in May this year, claiming that DOL’s advice to be careful of highly risky financial investments is a case of “over-disclosure” by the former Biden administration. Instead, Trump’s DOL said it has a neutral stance on 401(k) plans to invest in cryptocurrencies.

The executive order to amend the regulations on Thursday now shows that support for 401(k) cryptocurrency investment is more supportive, with Trump pledging to transform the United States into “the world’s crypto capital.”

Although the White House claims that assets like cryptocurrencies “provides competitive returns and diversification benefits, financial experts warn not to rely on such assets to fund your retirement funds. Alicia H. Monnel, senior adviser at the Boston College Center for Retirement Studies.

“Participants don’t understand the product, it’s a speculative and turbulent investment, and deviating from traditional investment is unlikely to improve returns, which may not be a prudent choice for 401(k)s,” Munnell wrote. “DOL should not open the door for such activities.”

Many cautionary stories, about nose value, scams, hackers and robberies, have made it clear that cryptocurrencies are far from a secure investment. Still, the fast, huge gain stories are luring investors to tempt and establishing important hype. Trump’s executive order may encourage more people to venture into cryptocurrencies, but whether it will benefit their interests remains to be seen.