Should Crypto Be Allowed in 401(k)s?

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Bloink: Even experienced investment professionals are challenged when it comes to truly understanding the risk of loss associated with this relatively new investment option. The Supreme Court's Northwestern decision made it crystal clear that plan fiduciaries can't satisfy their duties by merely offering a wide array of investment options. Instead, they're required to evaluate each option to determine whether it's an appropriate investment choice.

Byrnes: Plan fiduciaries should evaluate virtual currency options in the same way they would any other type of traditional investment when determining whether it's an appropriate retirement plan asset. The fact is, for some clients, it's possible that cryptocurrency could be a valuable and appropriate plan asset, and we shouldn't simply ignore that possibility.

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Bloink: We're talking about retirement account investment options that are presented to a diverse array of plan participants. Those participants aren't put through an educational course that details the pros and cons of the virtual currency investment strategy. In other words, they don't always have all the facts and might assume that the crypto option is an appropriate investment choice for the sole reason that it is presented in their 401(k) investment lineup. I can't see how that would be sufficient to satisfy a fiduciary's duty of prudence.

Byrnes: Ignoring the cryptocurrency investment option at the 401(k) level is ignoring reality. Plan participants are interested in these investment options, especially younger participants. Offering the crypto option as a diversified part of the participant's overall investment lineup might actually encourage younger savers to direct more funds into the tax-preferred retirement plan — because odds are strong that they'd invest in some type of crypto outside of the retirement plan anyway. This way, these participants at least have the benefit of an experienced fiduciary who has reviewed the investment selection.

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