Are you interested in cryptocurrencies? You might have the opportunity to invest in bitcoin and other digital currencies through your 401(k) with certain employers in the near future.

Financial service firms are having more and more conversations about the most effective ways to offer a reasonably secure cryptocurrency option within 401(k)s and similar retirement plans sponsored by employers.

Dave Gray, the head of workplace products and platforms at Fidelity Investments, states that they are observing a growing inclination from plan sponsors towards the concept of digital assets, especially bitcoin, as a viable long-term investment option for retirement investors.

However, most plans have not reached that point yet. A recent survey conducted by the Plan Sponsor Council of America sought to determine if employers sponsoring a qualified savings plan were contemplating or planning to include cryptocurrency as an investment option. Merely 2% responded affirmatively. The organization stated that plan sponsors overwhelmingly do not view cryptocurrency as a suitable or wise investment choice for retirement plans.

After the publication of a March 10 blog post by an official at the US Department of Labor, which urged fiduciaries to be extremely cautious before incorporating cryptocurrency options into their plans, the question was raised. The Labor Department is responsible for overseeing employer retirement plans to ensure compliance with the Employee Retirement Income Security Act (ERISA) and providing adequate protection for plan participants.

Ali Khawar, acting head of the DOL’s Employee Benefits Security Administration, expressed significant concerns regarding the decision of plans to subject participants to direct investments in cryptocurrencies or associated products like NFTs, coins, and crypto assets, considering the early stage of cryptocurrencies in their history.

Although the DOL did not directly prohibit plans from doing so, it stated that it will conduct inspections on any plans that provide crypto or associated products. Plan fiduciaries should anticipate inquiries regarding how they can justify their actions within the bounds of prudence and loyalty, considering the aforementioned risks.

If your plan were to eventually include cryptocurrency, known for its high volatility, it would be wise to exercise caution. While taking risks is necessary to achieve growth in your retirement savings, it is important to prevent your nest egg from being overly exposed to a high-risk asset that could potentially wipe out your hard-earned savings. The level of risk you choose to take must be balanced with factors such as your time horizon, risk tolerance, and a thorough analysis of the potential risks and returns associated with the assets you select.

One option will soon come to market

ForUsAll, a lesser-known participant in the 401(k) provider industry, announced plans to introduce a cryptocurrency investment option for its customers during the second quarter of this year.

ForUsAll, a company that mainly caters to small and medium-sized businesses, announced that more than 120 out of its 400 clients have enrolled for the new offering. Participants will have access to this option through a self-managed Coinbase account.

ForUsAll is confident that the protective measures it is implementing with its crypto option will adhere to ERISA standards and address the Labor Department’s concerns, despite the high volatility and potential for theft and loss in the cryptocurrency realm.

Participants are limited to investing only 5% of their existing 401(k) balance, 5% of their future contributions, and 5% of their employer matches into their crypto account. They will receive notifications once the value of their crypto investments surpasses 5% of their overall 401(k) portfolio, but the decision to adjust their allocation will be left to their discretion.

According to ForUsAll’s Chief Investment Officer David Ramirez, individuals are required to familiarize themselves with ForUsAll’s educational resources on cryptocurrency investments and pass a interactive quiz to show their understanding of the risks involved and the significance of refraining from making excessive bets on cryptocurrency using their retirement savings, prior to opening an account.

Additionally, they will have limited options as they can only choose from a carefully selected group of cryptocurrencies that have been reviewed by ForUsAll to guarantee they meet the standards for institutional investing. Ramirez stated that cryptocurrencies like Doge or Shiba Inu, which are considered meme coins, will not be included in this list due to their speculative nature.

He acknowledges that a crypto option may not be suitable for all employer plans.

He said that this might not be suitable for employers who don’t have employees that are adequately knowledgeable about investing.

For those who choose to invest in cryptocurrencies, ForUsAll believes that its crypto option can offer individuals a secure means of investment, similar to how institutions and financial professionals invest in this space for diversification and growth prospects.

Ramirez stated that the objective behind its design is to make prudent investments in cryptocurrencies more accessible.

Crypto Speculators Take Aim at the 401(k) Market

Samuel Bankman-Fried, the ex-CEO of FTX, caused crypto markets to plummet after declaring insolvency on November 11. He has frequently alluded to the resemblance of cryptocurrencies to Ponzi schemes, emphasizing that their value is not linked to tangible assets like stocks and bonds. Instead, he argues that their worth is driven by the influx of capital from inexperienced investors.

In April, Bankman-Fried, also known as SBF, expressed to Bloomberg his strong optimism towards cryptocurrency asset pricing, attributing it to the significant amount of money that currently lacks access but has the potential to join the market in the upcoming years.

Due to longstanding regulations safeguarding retirement funds, individuals investing in crypto have been unable to tap into the vast $6.4 trillion 401(k) market. This substantial reservoir of capital consists of inexperienced investors who lack knowledge about locating or comprehending securities filings, making them ideal prospects for the unpredictable crypto market.

Business interests connected to cryptocurrency wasted no time in retaliating against the warning issued by regulators against investing in crypto for 401(k) plans.

ForUsAll, a 401(k) management firm partially owned by Ribbit Capital, a crypto venture capital firm located in Palo Alto, California, filed a lawsuit against the Labor Department in June, urging them to withdraw the provided guidance. In September, ForUsAll started including cryptocurrency as an option in its 401(k) plans.

ForUsAll promised to withdraw its lawsuit a day before FTX’s collapse, on the condition that the court acknowledged the non-binding nature of the Labor Department guidance and assured that regulators would cease investigating cryptocurrency investments.

On November 14, the Labor Department urged the federal DC District Court to reject ForUsAll’s attempt at a tactical retreat, dismissing their backpedaling.

“I Think the Labor Department Is Wrong”

The outcome of the lawsuit holds significant implications as it could impact the crypto industry’s access to the savings of over sixty million Americans who possess 401(k) accounts.

Simultaneously, influential supporters of cryptocurrency in the Senate initiated resistance against the Labor Department’s guidance.

Senator Cynthia Lummis (R-WY), a prominent advocate for cryptocurrencies, informed CNBC in June:

In my opinion, the Labor Department is mistaken. I have a positive view on integrating 401(k) investments in crypto as it is a great concept. Including it in a diversified asset allocation is crucial as it provides assets that serve as a form of wealth preservation. Bitcoin, in particular, stands out as it is one of the most resilient forms of currency ever produced, and for this reason, it should be included as a portion of a diversified asset allocation for retirement funds.

Agreeing with Lummis, New York Democratic senator Kirsten Gillibrand, who is also a supporter of cryptocurrency, proceeded to provide a detailed explanation of the legislation put forth by both herself and Lummis.

Despite a request for comment by press time, Lummis, whose office did not provide a response, has maintained that she received only one donation from an associate of Bankman-Fried.

Lummis expressed her relief that Sam Bankman-Fried did not contribute to her campaign, as she is a Republican. However, she mentioned that they did come across a contribution from someone associated with FTX in one of their campaign accounts. They decided to return this contribution as they aim to avoid any perception that he had greater influence on their efforts than any other contributors. Lummis shared this with Forbes Digital Assets on December 5.

According to data collected by OpenSecrets, Multicoin Capital, a crypto VC firm, has emerged as Lummis’s primary source of funding in the previous election cycle. However, approximately 16 percent of Multicoin Capital’s funds are currently inaccessible as they are held by the bankrupt FTX. In total, Multicoin Capital employees have contributed $26,100 to Lummis’s campaigns and an additional $9,000 to her leadership PAC.

In the meantime, Bankman-Fried contributed a total of $10,800 to Gillibrand’s campaign and leadership PAC, while employees from Multicoin Capital donated an additional $19,400.

Gillibrand has amassed campaign contributions totaling $150,000 from the crypto industry in recent years, whereas Lummis has received $119,000.