Last Updated: July 18, 2022

Why Fiduciaries Must Be Wary of Crypto in 401k Plans


  • Fidelty Investments is the first firm to announce the inclusion of crypto in the 401(k) plans.
  • News of a crypto investment option looks attractive to employers, employees, and retirees.


Cryptocurrency investment is not for the faint of heart. In November 2021, Bitcoin was worth $68,000 but fell below $20,000, and its volatility makes investing a hazardous business. Such a volatile nature is why investors need to be very careful while investing in cryptocurrency.  

By early 2022, Fidelity Investments became the first firm in America to announce that employees could add crypto—in this case, Bitcoin—to their 401(k)-retirement plan. The news of an investment option for workers appealed to employers, employees, and retirees. Employers want more labor attraction, while workers are excited about being able to increase savings even higher than before. Also, retirees took notice because it means they might finally be able to get back some money lost during recent market fluctuations.  

Employers’ employee retirement plans can be a tempting target for those looking to sue. Facing an uptick in litigation, employees’ lawyers are using Employee Retirement Income Security Act of 1974 (ERISA) as their weapon of choice and footing the bill with losses up front before any profits come out.  

This may sound like bad news, but there’s some good too. Since 401(k)s operate under such strict rules and regulations set forth by law, lawsuits involving these types custody arrangements will likely continue until the current president leaves office (or gets impeached).  


Cryptocurrencies are a new and exciting financial instrument that has recently gained momentum. However, unlike traditional currencies such as dollars or euros, cryptocurrencies do not have any legal tender status in the United States since they can’t be redeemed for fiat currency at some point down the line—making them subject to higher risk standards under ERISA law when investing money into these assets.  

The volatility caused by negative valuation swings could lead courts to consider this type of investment too risky, even though it may seem otherwise from afar. That can be a cause of concern for fiduciaries who need to minimize the risk of significant losses.   

When a fiduciary is acting in their clients’ best interests, they need to consider what will challenge the valuation of the investment down the road. One duty of a fiduciary is always to make sure that any decisions are for the client’s benefit and not just oneself, including deferrals, costs like volatility removal from investments – something which can help pass those benefits along even more so if there’s ever a disputed situation later on.  

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