Trump Opens the 401(k) Door to Crypto and Private Equity

Bitcoin’s been trading like it had too much espresso, hovering around $122,300 today, just shy of its all-time high near $123,100, but with enough whiplash potential to remind everyone that 10% daily moves aren’t rare in crypto land. The 30-day implied volatility sits near 36.5%, its lowest since October 2023, suggesting calmer waters… or a deceptive lull before the next big wave. Against that backdrop, President Trump has signed an executive order that could make crypto, private equity, and other alternative assets part of your 401(k) menu. For retirement pros and investors alike, this is a historic shift, equal parts opportunity and caution.

A Safe, Simple Past

For decades, the rules governing 401(k) plans under the Employee Retirement Income Security Act (ERISA) kept menus intentionally restrained. Most participants could choose from a handful of public equity funds, bond funds, and cash-like options. The priorities were clear: liquidity, transparency, and low fees. Alternative investments, private equity, venture capital, commodities, and especially cryptocurrencies, were absent, not only because of their risk and complexity, but also because they were operationally difficult to value and often came with high legal exposure.

There were early conversations about expanding access. SEC Chairman Paul Atkins, for example, supported exploring digital assets in retirement plans but emphasized the importance of transparency and investor education. As we detailed in Atkins Calls for Transparency as Crypto Nears Entry Into 401(k) Plans, he and Commissioner Hester Peirce began laying groundwork for a digital asset task force and policy framework through the GENIUS Act. Even so, regulatory caution kept alternative assets firmly outside most 401(k) accounts.

Trump’s August 2025 Executive Order

In a major policy shift, President Trump signed an executive order directing the Department of Labor and the SEC to broaden the definition of qualified investments in 401(k) plans. The goal: allow employers to offer options that include cryptocurrencies like Bitcoin and Ethereum, private equity, venture capital, infrastructure projects, real estate, and even gold. The order also signals a willingness to reduce the litigation risks that have discouraged plan sponsors from offering higher-risk products. By including provisions to protect fiduciaries who follow the new guidance, the administration is trying to unlock a portion of the trillions of dollars held in defined contribution plans for alternative asset managers.

Source: FT

According to the Investment Company Institute, total assets in 401(k) plans have tripled since 2007, now topping $8.8 trillion in Q1 2025. Industry reaction has been swift. BlackRock, Apollo, and Blackstone are already building products, such as hybrid target-date funds and self-directed brokerage windows, that blend public and private holdings. The expectation is that, over time, these structures will allow retail investors to access strategies historically reserved for pensions and high-net-worth clients.

Opportunity Meets Complexity

If implemented, this shift could meaningfully alter the return and risk profile of American retirement accounts. Private markets and certain digital assets have, in some cycles, outperformed traditional stocks and bonds. Advocates point to the diversification benefits and the chance for participants to tap into growth sectors that were previously off-limits. But the changes also introduce challenges that financial professionals will need to address head-on. Alternative assets carry higher costs, private equity’s “2 and 20” fee structure dwarfs the 0.26% average for mutual funds, and often lack daily liquidity. Valuations are less transparent, sometimes based on quarterly reports or subjective models. And in crypto, volatility can erode value rapidly, especially for investors with shorter time horizons or low tolerance for large drawdowns.

For employers, rolling out these options will require new participant education, upgraded recordkeeping systems, and careful monitoring of allocations. Adoption is likely to be gradual, with larger plans leading the way once regulatory guidance is finalized, expected within the next six months. 

Tax and Regulatory Considerations

The tax implications depend heavily on how and where these assets are held.

Inside a Traditional 401(k):

• Contributions reduce taxable income in the year made.
• Growth is tax-deferred.
• Withdrawals are taxed as ordinary income at your marginal rate.

Inside a Roth 401(k):

• Contributions are made with after-tax dollars.
• Growth and qualified withdrawals are tax-free.

Outside a 401(k):

• The IRS treats crypto as property. Gains on assets held one year or less are taxed at ordinary income rates (10%–37%).
• Gains on assets held longer than a year are taxed at long-term capital gains rates (0%, 15%, or 20%, depending on income).
• Other crypto income—such as staking rewards, mining proceeds, or airdrops—is taxed as ordinary income.

Regulatory Changes for 2025:

• Exchanges must issue Form 1099-DA for crypto transactions.
• Wallet-by-wallet reporting is mandatory, increasing compliance demands.
• Holding alternative assets in a 401(k) can shield them from annual capital gains taxes, with the eventual tax determined by account type (traditional or Roth) upon distribution.

Closing Thought

The expansion of 401(k) investment menus into crypto and private equity represents a fundamental change in the U.S. retirement system. It blends the potential for higher returns and greater diversification with the realities of higher risk, greater complexity, and the need for rigorous oversight. For finance and tax professionals, the coming months will be about digesting new rules, advising clients on suitability, and ensuring that the principles of transparency and education, long championed by Atkins, remain at the center of this new investing frontier. Subscribe to our newsletter for the latest insights, trends, and expert analysis from MYCPE ONE Insights delivered straight to your inbox.

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