Department of Labor Issues New Guidance on Cryptocurrency In Retirement Plans

March 23, 2022


The U.S. Department of Labor issued Compliance Release No. 2022-01 on March 9, 2022, raising “serious concerns” over the prudence of retirement plan fiduciaries’ investing in cryptocurrencies, and cautioning plan fiduciaries to exercise “extreme care” before making such investments. Although the Release recites the fiduciary standard of ERISA requiring that plan fiduciaries prudently select and monitor plan investments, the Release presumes that cryptocurrencies in retirement plans pose “significant risks” to plan participants.

Although the Release does not rise to the level of either law or regulation, its warning is concerning, particularly as it extends to plan fiduciaries allowing brokerage windows through which participants might invest in cryptocurrencies. The DOL admonished plan fiduciaries to expect inquiries into cryptocurrency investments in retirement plans, including through brokerage windows. The DOL announced that it would ask plan fiduciaries how such investments square with the fiduciary duties of prudence and loyalty.

Presumption of Imprudence

The specific concerns that the DOL raised in the Release are that investments in cryptocurrencies are likely extremely speculative and volatile, pose difficulties in valuation, are opaque when it comes to assessing risk, and present recordkeeping challenges.

In addition, because cryptocurrencies are virtual assets, they are subject to the unique risk of total loss through hacking, theft, or losing a password, and reflect inconsistent accounting standards by market intermediaries. Significantly, cryptocurrencies may involve illegal activity such as the sale of unregistered securities or money laundering.

The clear presumption by the government is that the investment by retirement plans in cryptocurrencies, including through participant-directed brokerage windows, is likely per se imprudent and violative of ERISA fiduciary standards.

Political Environment

Administrative law, in general, is colored by the tone that the Executive Branch sets. The DOL Release was issued a day after the Executive Order issued on March 9, 2022 by President Biden raised broad concerns about regulating cryptocurrencies and their effect on national security.

A specific concern includes the extent to which foreign cryptocurrencies could displace existing currencies and alter the payment system in ways that could undermine the financial centrality of the United States.

The Executive Order, issued right after the U.S. imposed sanctions on Russia for its most recent invasion into Ukraine, states, in part:

“Digital assets may also be used as a tool to circumvent the United States and foreign financial sanctions regimes and other tools and authorities…Illicit actors, including the perpetrators of ransomware incidents and other cryptocrime, often launder and cash out of their illicit proceeds using digital asset service providers in jurisdictions that have not yet effectively implemented the international standards set by the inter-governmental Financial Action Task Force (FATF). . The continued availability of service providers in jurisdictions where international … standards are not effectively implemented enables financial activity without illicit (sic) finance controls. Growth in decentralized financial ecosystems, peer-to-peer payment activity, and obscured blockchain ledgers without controls to mitigate illicit finance could also present additional market and national security risks in the future.”

The Executive Order asked federal agencies to submit a report to the President on how to strengthen international law enforcement cooperation for detecting, investigating, and prosecuting criminal activity related to digital assets. In this context, the administration also invited the Department of Labor to propose rules to protect consumers.

In directing its Release toward retirement plans, the DOL has sent a strong warning to retirement plan fiduciaries, which hold an aggregate of over $37 trillion, a significant slice of the U.S. economy.

Cryptocurrency and U.S. Jurisdiction of Retirement Plan Assets

The rules governing ERISA fiduciaries require that retirement plan assets have the “indicia of ownership” within the jurisdiction of U.S. district courts, either directly or through a U.S. agent. (ERISA Section 404(b)) The purpose of the rule is to provide the protection of the courts to plan participants who may suffer damages as a result of the selection of certain assets held by a plan.

However, neither the general rule nor the exceptions to ERISA Section 404(b), appear to encompass digital assets because such assets lack physical presence, are not issued by a government or U.S. entity nor are typically held or controlled by a plan fiduciary. If digital assets are not subject to the jurisdiction of the U.S. district courts, they cannot be held in an ERISA retirement plan.


  1. The U.S. Department of Labor, reflecting policies set by the Biden Administration, announced that it will scrutinize cryptocurrencies in retirement plans. Specifically, the DOL may require, on audit, evidence by fiduciaries supporting why such investment is prudent.
  2. The DOL will likewise scrutinize self-directed brokerage accounts in retirement plans if they hold cryptocurrency, and possibly treat such investments as a breach by plan fiduciaries. 
  3. Cryptocurrency investments in a retirement plan likely violate ERISA Section 404(b), which requires plan assets have the indicia of ownership within the U.S. so that they are subject to the jurisdiction of U.S. district courts. Accordingly, plan fiduciaries should consider monitoring plan assets for such investments to limit or avoid them.

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