Trump's executive order may rewrite the investment landscape of U.S. pensions.
According to overnight news from the UK (Financial Times), Trump is preparing to sign an executive order allowing pension plans like 401(k) to invest in cryptocurrencies, gold, and private equity as 'alternative assets'. Insiders say this order will prompt regulators to reassess existing pension investment restrictions, paving the way for digital assets to enter the $8.7 trillion U.S. pension market.
This move is not without precedent. On May 28, the U.S. Department of Labor rescinded the Biden-era guidance documents that 'extremely cautiously treated crypto assets'; in 2022, Republican Congressman Peter Meyer proposed a bill to incorporate digital assets into the relevant legal framework. Although it did not pass, it planted the seeds for a policy shift.
The core of the executive order is to break the long-standing reliance of 401(k) plans on traditional stocks and bonds, allowing for a more diversified asset allocation. It instructs regulatory agencies to remove barriers preventing alternative assets from entering 401(k) managed funds. Although the White House has expressed caution, it cannot hide the intention to promote the mainstreaming of cryptocurrency. This is a continuation of Trump's pro-crypto policies, as his family business has cryptocurrency investments, and his personal crypto asset holdings exceed $51 million. The Labor Department's earlier withdrawal of the order also laid the groundwork for this.
The scale of the U.S. pension market is astonishing, reaching $9 trillion, with 401(k) plans accounting for $8.7 trillion. Traditionally, pensions have mostly invested in publicly traded securities. IRAs provide individuals with autonomous savings options. Similar to China's pension system, both have multi-tiered protections, and the U.S. move has implications for global wealth allocation concepts.
This executive order not only benefits cryptocurrencies but also presents a potential feast for private equity giants like Blackstone, Apollo, and BlackRock. The order requires the Labor Department to consider providing a 'safe harbor' mechanism to reduce legal risks associated with private equity investments. Private equity groups are expected to enter the 401(k) market or attract hundreds of billions of new assets, having already collaborated with large asset management companies. Some state governments have already started relevant pilot programs.
At the legislative level, the U.S. House of Representatives has passed three cryptocurrency-related bills, with the GENIUS Act expected to be signed into law by Trump, providing a clearer legal framework for the industry. However, market challenges remain. Palisade co-founder Mantan Dave warns that if the U.S. regulatory framework is unclear, companies may turn to markets with clearer rules. Furthermore, private asset investment poses issues such as high costs, high leverage, and low transparency in valuation, which require caution from regulators and investors.
When Trump's executive order meets the $9 trillion pension market, this experiment is of great significance. It may allow ordinary people to share the technological dividends in the digital age, but it could also expose pensions to new types of risks. The final outcome depends on whether regulators can find a balance between innovation and protection, redefining the connotation of 'retirement savings'.