Trump's pension reform: who will make money on cryptocurrency investments?

On August 7, 2025, US President Donald Trump signed an executive order opening the way for US pension funds and private asset managers to invest in cryptocurrencies, non-public companies, and real estate. The document revises the rules under which the U.S. Department of Labor (DOL), the U.S. Securities and Exchange Commission (SEC), and the U.S. Treasury Department prescribe permissible "safe harbours" (safe harbours) for employers to invest in their employees' 401(k) pension plans.

A 401(k) plan is one of the main retirement savings instruments for employees of private companies in the United States, named after a section of the Internal Revenue Code. Under it, an employee voluntarily contributes a portion of his or her salary to an individual account, the funds from which are invested in funds, stocks or bonds. Employers often add their own funds to employee contributions - a "matching contribution" or co-funding. The management of 401(k) plans is governed by ERISA law: it imposes strict fiduciary duties on managers. According to the Investment Company Institute, in 2024, 401(k) plans hold more than $8.9 trillion and involve approximately 70 million Americans, making them the key retirement savings vehicle in the United States.

What ERISA law provides

● Establishes uniform federal standards for private pension and welfare plans (e.g., 401(k)).

● Obliges administrators to act in the best interests of participants (fiduciary responsibility).

● Requires regular reporting and disclosure of plan information.

● Guarantees savings protection through the federal PBGC corporation (for defined benefit plans).

● Gives participants the right to a judicial remedy when their rights are violated.

Trump changed the usual rules for U.S. 401(k) retirement plans, reducing the legal risks of money managers. And today they could risk client money by investing part of their savings in venture capital funds. But such a strategy would have been seen as too risky: Any disclosure or profitability problems could have resulted in lawsuits. Now, officials from the Departments of Labor and Treasury can't support such claims, and managers have been given the official go-ahead to use tools that wealthy Americans with personal retirement plans outside the 401(k) system typically use.

It could have all happened as early as 5 years ago, but Trump didn't make it in time. In June 2020, the U.S. Department of Labor (back during his first term in the White House) issued Information Letter 06-03-2020, which for the first time allowed private equity to be included in the list of tools for 401(k) plans. Officials recognized the risks of such investments (long horizon, low liquidity, valuation complexity and high fees), but believed that with proper due diligence, fiduciaries could consider such investments under ERISA standards.

However, this position did not last a year. With the arrival of Joe Biden in the White House, the Department of Labor took the opposite position. It issued further clarifications in 2021-2022, emphasizing that cryptocurrencies and other alternative assets pose excessive risks to retirement plan participants. The DOL warned employers and managers that including such assets in a 401(k) could be considered a breach of fiduciary duty and subject to legal liability.

This decision was not related to the political struggle between Republicans and Democrats. Officials were spooked by the willingness of businesses to work with retirement savings in the segment of new instruments. In 2022, for example, management company Fidelity was one of the first in the U.S. to offer to add bitcoin to 401(k) plans. "Fidelity Investments today announced that employer retirement plan administrators will soon be able to offer their participants access to bitcoin through a Fidelity Digital Assets Account (DAA), the first offering of its kind in the industry," the company said in an April 2022 press release.Prior to that, ForUsAll Inc. announced a deal with Coinbase that allowed its clients to invest up to 5% of their 401(k) retirement plan contributions in bitcoin, ethereum and other cryptocurrencies through a self-managed digital asset window.

The Labor Department then issued tough recommendations and warned that employers should be prepared for questions from regulators. Ali Khawar, acting assistant secretary of the U.S. Department of Labor, told critics of the Labor Department's recommendations in an interview with The Wall Street Journal, "We didn't think we could consider ourselves a responsible regulator and say nothing. Should we have waited until people lost most of their retirement savings before voicing our opinion?"

Back in the U.S. presidency Trump has found a way around the 2022 warnings. Employers and managers must create a "safe environment" to invest in new companies and instruments, including real estate.

Paradoxically, the Republican justified his handling of risky instruments in Democrat terms: the rich can invest in a wide range of instruments, while the middle class is locked into a rigid 401(k) - they should be equalized in pension rights.

In fact, the ban on 401(k) retirement plans investing money in cryptocurrency and other alternatives didn't even exist before President Trump's executive order, recalls Phyllis Borzi, she was assistant secretary of the Department of Labor's Benefits Security Administration during the Obama presidency. Borzi believes that's no accident. "The fact that retirement plan sponsors aren't offering these investments speaks to the state of the market," she said.

The main problem with Trump's decree is that new investments are risky and expensive. Cryptocurrencies fluctuate greatly in price, and venture capital funds are poorly suited for quick withdrawals and opaque for investors. In addition, their fees are higher than traditional ones: they typically operate on a "2%+20%" formula (2% annually for management fees and 20% of profits); manager fees on traditional index funds in a 401(k) range from 0.06% to 0.45%.

In a Swamp Notes podcast hosted by Financial Times journalists, Elizabeth de Fontane, a law professor at Duke University said: "There's so much money in the private markets now that it makes sense that they've essentially flattened out between the public and private markets. [...] If you talk to the big institutional investors who invest in private markets, they are all extremely unhappy with their investments in those markets right now. They're stuck in these illiquid investments that private equity and venture capital funds can't seem to get rid of, and so it's basically the worst possible time for retail investors to come in. They will just rescue existing investors in the private markets rather than doing themselves a favor."

Legal risks remain as well. Pension plan managers are still required to act only in the best interests of employees and retirees. If investments prove too risky and people lose money, 401(k) companies could face lawsuits.

The main argument in favor of expanding the toolkit is diversification. If pension money is invested not only in stocks and bonds, but also in other assets - for example, real estate, private equity funds or even cryptocurrencies - it can reduce risks and provide new sources of income over the long haul.

The second plus is higher profitability. Private equity and venture capital funds, while retaining all the risks, traditionally promise higher capital gains than the regular stock market. For those new to or new to a 401(k) plan with a long savings horizon, Trump's decision could provide additional returns. BlackRock (I'll add, it's one of the potential beneficiaries of Trump's decision) estimates that crypto options for the average 401(K) participant could increase retirement plan returns by 15% over 40 years.

Data over the past 25 years shows that U.S. venture capital has delivered a compound annualized return (CAGR) of 14.3%, while the S&P 500 index has delivered a CAGR of 7.7%. An investment in a venture capital fund in 2000 today would increase an investor's money nearly 5 times, while a similar amount invested in the S&P 500 would only double an employee's wealth in a 401(k) plan.

US media agree that the main beneficiaries of Trump's decree will be private equity firms, venture capital funds and the crypto industry. Barron's notes that for private equity, which manages $3.1 trillion in assets in the US, this is a "huge growth opportunity" due to access to retirement savings. The Financial Times emphasizes that the cryptocurrency sector, which has been lobbying for its assets to be included in pension schemes, now has access to "trillions of dollars of new investment." According to AP News, for the first time, the road to money in 401(k) accounts is also opening up for venture capital funds, which will be able to raise pension funds on par with their traditional investment vehicles.

Potential beneficiaries include private equity funds such Apollo Global Management, KKR & Co, Carlyle Group and Blackstone.

According to the National Venture Capital Association (NVCA), by the end of 2024, the total assets under management (AUM) of U.S. venture capital funds was about $1.25 trillion. Last year, U.S. venture capital firms completed 14,320 deals totaling $215.4 billion.

The global private equity real estate market was valued at $5.1 trillion in 2025, of which 47% is accounted for by the U.S. and Canadian markets.

Even if new instruments and funds account for 10 percent of 401(k) retirement plans, in current values, that's tens of percent of the total amount raised in venture capital and real estate market instruments.

This article was AI-translated and verified by a human editor