DOL Warns 401(k) Plan Fiduciaries about Cryptocurrency Investments

Investments in Cryptocurrencies such as Bitcoin and Ethereum are becoming more and more mainstream. Driven by outrageous returns, and presenting outrageous volatility and risk, both traditional institutional and individual investors have started to dip their toes into this uncharted territory.

New guidance from the Department of Labor, however, warns 401(k) plan fiduciaries about offering cryptocurrencies as plan investment options. In Compliance Assistance Release No. 2022-01 (found here), the DOL warns 401(k) plan fiduciaries that they should offer “extreme care” before offering cryptocurrency as an investment option. Such investments, the DOL notes, are an extraordinary risk, and offering it as an investment option could potentially suggest to unsophisticated plan investors that it has the blessing of knowledgeable investment advisors. Further, there are numerous unresolved recordkeeping and custodial issues—despite being lauded as a safe investment, hacks of cryptocurrency accounts are common, and such assets are not held in trust or any other traditional custodial account. The DOL will be investigating the extent to which such investments are being used in 401(k) plans.

The days when funds devoted to cryptocurrency are regularly plan investments are likely far off—many investment professionals view Bitcoin as just a step up from a Ponzi scheme. But there are investment funds available that are now devoted to cryptocurrency, and given the frenzy surrounding crypto assets, it is possible that there will be a push to offer the opportunity to invest in crypto through brokerage accounts. The extent to which investments in such a brokerage window are subject to ERISA fiduciary rules as a separate area of developing law—the DOL has issued conflicting guidance on this issue, but certainly wishes to have an expansive definition of a fiduciary’s duties with respect to investments in a brokerage window. It recognizes that crypto may well become a brokerage window investments, warning fiduciaries that those who offer such investments through “brokerage windows should expect to be questioned about how they can square their actions with their duties of prudence and loyalty in light of the risks” inherent in such investments. Adding crypto investments to such windows could see the bubbling controversy about the fiduciary responsibility to monitor investments in a brokerage window come to a head.

Compliance Assistance Release No. 2022-01 | U.S. Department of Labor (


Andrew Holly

Andrew represents clients in a wide range of complex civil matters.

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