$10 trillion and 70 million investors: How much impact does crypto entering 401(k) have?

Source: Galaxy; Compiled by Jinse Finance Claw

On March 30, 2026, the U.S. Department of Labor (DOL) took an important step toward opening 401(k) plans to alternative investments, including private equity, private credit, and cryptocurrency.

The proposed rules would establish a process-based six-factor safe harbor, clarifying how fiduciaries (typically plan sponsors and members of the designated investment committee) are responsible for selecting and overseeing 401(k) investment options, and ensuring that the plan is administered in the best interests of participants in order to fulfill its fiduciary duties under the Employee Retirement Income Security Act (ERISA).

While the Employee Retirement Income Security Act (ERISA) does not expressly prohibit allocating assets such as private equity, private credit, tangible assets, or cryptocurrency within 401(k) plans, due to structural challenges—including litigation risk, regulatory uncertainty, and costs, liquidity, and valuation issues—these asset classes have been limited in their practical application. The proposed rules aim to reduce litigation risk through a six-factor investment evaluation process. If the process is followed and thoroughly documented, it helps strengthen fiduciaries’ ability to demonstrate prudence in court.

The rule does not distinguish between asset classes. The same framework applies to all investments within plan options, from index funds to target-date funds that include private equity investments.

The six factors are:

• Performance: Risk-adjusted expected returns (after fees) must help achieve the plan’s objectives.

• Fees: Fees must be commensurate with returns and comparable alternatives, and must be reasonable.

• Liquidity: The liquidity profile of the investment must match participants’ withdrawal and distribution needs.

• Valuation: The investment must be subject to reliable and consistent valuation, which is particularly important for private-market assets with poor liquidity.

• Benchmark analysis: A meaningful benchmark with similar mandates and risk characteristics must be identified, and comparisons must be made using it.

• Complexity: The fiduciary must have, or obtain, sufficient professional expertise to correctly understand and evaluate the investment.

These six factors stem from a comprehensive review by the U.S. Department of Labor of decades of relevant case law, existing regulations, prior secondary regulatory guidance, Executive Order No. 14330, and stakeholder input—combined with the Department’s own experience. This framework is not a wholly new regulatory invention; rather, it is the codification and structuring of the standards that courts and practitioners have long used when assessing fiduciary conduct.

Our View

For a long time, the inclusion of alternative investments in 401(k) plans has been constrained by multiple factors, including regulatory uncertainty, structural frictions, and litigation risk. The regulatory environment has long been unfavorable to the development of alternative investments.

In March 2022, the U.S. Department of Labor issued guidance expressing “serious concern” about cryptocurrency in 401(k) plans, urging fiduciaries to exercise “extra caution” before including cryptocurrency in plan options.

Although the guidance was challenged almost immediately, opposition was ultimately dismissed on the grounds that the Department’s issuance is non-binding and not subject to review under the Administrative Procedure Act (APA), so its practical deterrent effect remained.

Even so, Fidelity launched a Digital Assets Account the following month, becoming the first large retirement plan provider to offer Bitcoin as a 401(k) investment option. But few plan sponsors followed suit.

During his second term, President Trump signed Executive Order No. 14330 in August 2025, directing the Department of Labor, the SEC, and the Treasury to facilitate access to alternative investments in fixed-contribution pension plans, and to reduce the regulatory burdens and litigation risks that have long hindered fiduciaries from taking action. The rule draft proposed by the U.S. Department of Labor on March 30 is a direct implementation of this executive order. It clarifies under what circumstances incorporating alternative investments into retirement plans would satisfy fiduciary duties under the Employee Retirement Income Security Act (ERISA).

The proposal is intended to defend on two fronts: first, it constitutes a well-argued institutional framework that may be persuasive to courts; second, more importantly, it closely follows the long-standing fiduciary principles under the Employee Retirement Income Security Act (ERISA) developed through case law. The proposal also reflects a clear policy shift from deterrence to promotion. The Department of Labor is explicitly seeking to recalibrate the role of litigation in shaping fiduciary behavior. The rule is not designed to make fiduciaries immune from lawsuits; rather, it attempts to strengthen defenses by guiding judicial review through a structured “safe harbor,” while following prudent procedures.

This directly responds to longstanding industry concerns that class action litigation risk effectively limits plan design—especially for high-fee or less liquid assets such as private equity and cryptocurrency. At the same time, the U.S. Department of Labor acknowledges that litigation risk will continue to exist, and that adoption of the rule is very likely to be gradual. This indicates that the rule’s purpose is less about immediately pushing a broad shift in asset allocation, and more about serving as a legal foundation: if the rule is upheld in court, the permitted investment scope for fixed-contribution plans could be expanded step by step.

Exactly how much openness this will bring in practice remains an open question. The population of 401(k) fiduciaries is fairly conservative, and there is also uncertainty about the judicial enforceability of safe harbor provisions. Recent strains in the private credit market further highlight concerns about liquidity, unclear valuation, and downside risk in asset classes with lower transparency, reinforcing the principle that fiduciaries should act cautiously. Since courts no longer need to follow the Department of Labor’s ERISA interpretation after “Loper-Bright,” federal judges can independently determine that including a particular alternative investment is not prudent, regardless of whether the fiduciary followed the six-factor evaluation process—even though that process itself is very likely an important factor in the court’s analysis.

A strong team of plaintiffs’ attorneys continues to drive 401(k) litigation. Since 2016, more than 500 lawsuits related to excessive fees have been filed, ultimately leading plan sponsors to pay settlements totaling more than $1 billion. Until the relevant framework has been validated in court through litigation, fiduciaries may still be unwilling to take action first.

Even so, the direction is undoubtedly positive. This rule fulfills the U.S. Department of Labor’s responsibilities within a broader, multi-track effort—to open 401(k) plans to alternative investments. The scale of this opportunity is enormous. The 401(k) market has roughly $10 trillion in assets, and about 70 million participants. Even if asset allocation is only moderately shifted toward alternative investments, it will bring a transformative new source of capital.

The comment period for the proposed rule ends on June 1, 2026; after that, the U.S. Department of Labor will review the feedback and decide whether and how to finalize the framework.

Ultimately, the final impact depends less on the rule itself and more on how fiduciaries, regulators, and the final courts interpret and apply the rule.