US Labor Department reverses course on crypto in 401(k) plans, accuses Biden administration of placing 'thumb on the scale'

The U.S. Department of Labor reversed earlier guidance discouraging retirement managers from considering cryptocurrency as an investment option in 401(k) plans, marking the latest agency to pull back statements limiting digital assets.

The agency tasked with protecting workers and retirees released guidance in 2022 that encouraged managers to "exercise extreme care" before adding crypto to their investment strategies. Now, U.S. Secretary of Labor Lori Chavez-DeRemer said investment decisions should be made by fiduciaries, "not DC bureaucrats."

"The Biden administration's department of labor made a choice to put their thumb on the scale," Chavez-DeRemer said in a statement on Wednesday. "We're rolling back this overreach and making it clear that investment decisions should be made by fiduciaries, not DC bureaucrats."

The Labor Department is the latest agency to rescind previous statements limiting crypto activity since President Donald Trump took office in January. The new administration has taken a friendlier stance to the digital asset industry in part by appointing crypto-supportive officials to lead key agencies. The previous administration took a more wary approach to crypto.

In the Labor Department's 2022 guidance, the agency raised concerns around the idea that crypto can produce outsized returns and cautioned that it could cloud investors' judgment and attract inexpert investors.

Other agencies have taken a similar approach to crypto. In March, the Federal Deposit Insurance Corporation reversed standards that require financial institutions to notify the agency before engaging in crypto-related activities. Later, the Federal Reserve retracted guidance discouraging banks from participating in crypto.