President Trump's executive order allowing crypto investments in 401(k) plans sparks bullish market sentiment and could reshape the $12.5 trillion retirement system.

Trump's Executive Order on Crypto in 401(k)s Triggers Bullish Market Sentiment

President Donald Trump signed an executive order permitting alternative asset investments, including crypto, within 401(k) plans, potentially impacting the $12.5 trillion US retirement market; Bitcoin rose 2% to $116,542.

The Executive Order: Democratizing Access to Alternative Assets

On August 7, 2025, the White House issued an executive order titled “Democratizing Access to Alternative Assets for 401(k) Investors.” This order directs the U.S. Department of Labor to reassess restrictions on alternative assets in retirement savings plans, potentially allowing private equity, real estate, and digital assets like crypto into 401(k) portfolios.

Every American preparing for retirement should have access to funds that include investments in alternative assets when the relevant plan fiduciary determines that such access provides an appropriate opportunity…to enhance the net risk-adjusted returns on their retirement assets.

This policy could fundamentally change the funding source structure of the crypto market by leveraging the $12.5 trillion 401(k) pension market in the United States. Even a small allocation, such as 3%, could bring approximately $24 billion in new inflows. BlackRock has also announced plans to launch a 401(k) target date fund in 2026 that includes private equity and encryption asset allocation, signaling traditional financial giants are preparing for institutional funds to enter the crypto market.

Market Implications: A Potential $122 Billion Influx

The inclusion of crypto in 401(k) plans is viewed as a regulatory signal that crypto assets are being considered within the US wealth management system. The focus is now shifting towards the potential size of crypto allocations and the number of plans that implement them, factors that will ultimately determine actual investment flows. Defined contribution (DC) assets stood at $12.2 trillion on March 31, with $8.7 trillion in 401(k)s. A 0.10% default allocation to crypto inside qualified default investment alternatives could theoretically amount to $12.2 billion if adopted across the DC universe. A quarter of plans deploying a 0.25% sleeve would equate to roughly $7.6 billion in structural bids sourced from payroll contributions and employer matches.

Expert Commentary and Regulatory Context

The executive order also directs the Department of Labor, Treasury, and SEC to develop clear guidance so that plan sponsors can confidently offer these products while meeting their fiduciary duties. The Department of Labor rescinded its 2022 crypto compliance release that had warned fiduciaries to exercise “extreme care,” removing a key chill around menu design. According to the Investment Company Institute, defined contribution (DC) assets stood at $12.2 trillion on March 31, with $8.7 trillion in 401(k)s.

Risks and Challenges

While the inclusion of Bitcoin in 401(k) plans marks a turning point, it also introduces challenges related to volatility, legal liability, fees, and infrastructure. Large price swings in crypto markets pose risks to retirement plans that prioritize steady growth and risk management. Ary Rosenbaum, a retirement law specialist, warned that offering Bitcoin in 401(k)s could lead to legal challenges if employees suffer steep losses, potentially leading to lawsuits questioning the prudence of including such assets.

Broader Market Impact

This move is seen as a significant step forward for crypto adoption, potentially leading to greater institutional involvement and mainstream acceptance. Advocates believe that long-term, passive inflows from retirement accounts could help stabilize the asset's volatility. CJ Burnett of Compass Mining argued that adding Bitcoin to 401(k)s unlocks a large pool of capital and could contribute to greater stability over time.

By allowing crypto into defined-contribution retirement plans, the federal government has effectively opened a new gateway for more than 90 million Americans to gain exposure to crypto through their employer-sponsored savings.