I. Introduction
On August 7, 2025, Trump signed an executive order allowing 401(k) retirement pension plans to invest in alternative assets, including private equity, real estate, and cryptocurrencies. This move breaks the long-standing practice of limiting U.S. retirement fund investments to stocks and bonds, opening the door for substantial pension funds to enter the crypto market. The 401(k) plan is the primary corporate retirement system in the U.S., covering nearly 90 million American workers and managing trillions of dollars in assets. It is foreseeable that, compared to the current total market value of about $4 trillion in the crypto market, even a small portion of 401(k) funds flowing into the crypto market could have a significant impact. Following this news, coupled with expectations that the Fed is likely to initiate a rate-cutting cycle in September, cryptocurrencies such as Bitcoin and Ethereum surged, igniting further bullish sentiment.
This article will comprehensively analyze this significant policy shift from multiple dimensions: first, reviewing the current status and investment landscape of the U.S. pension system and 401(k) plans, interpreting the background and potential impacts of the new policy; then, providing a global perspective by comparing the experiences of other countries in pension investments in crypto, assessing the implications of the U.S. model; next, analyzing the potential driving effects of this policy favorability on the crypto market; finally, based on this, we will also assess the changes in the crypto market landscape considering the shift in the Fed's monetary policy, exploring the evolving role of crypto assets in future retirement wealth allocation.
II. Understanding the U.S. 401(k) Pension Plan
1. The Three Pillars of the U.S. Pension System
The U.S. pension system consists of three main components:
National social security: Managed by the federal government, it provides basic retirement income security and covers almost all employed individuals, aiming to ensure a basic standard of living after retirement.
Employer-sponsored corporate annuity plans: Represented by 401(k), primarily targeting private sector employees, it is the most common employer-sponsored retirement savings method in the U.S.
Individual retirement accounts and annuities (IRAs & Private Annuities): Fully established and funded by individuals, serving as supplementary retirement savings tools.
2. The Scale and Investment Composition of 401(k)
The 401(k) plan is an employer-sponsored retirement savings plan with tax benefits, primarily for private sector employees. The plan is mainly based on employee contributions, where employees withdraw a portion of their pre-tax salary to deposit into their 401(k) accounts, and employers usually provide a matching contribution at a specific ratio set by the employer. Since its establishment in 1981, the plan has grown from a supplementary savings tool to a core pillar of the U.S. pension system and the largest corporate annuity plan.
According to a report released by the Investment Company Institute (ICI) in June, as of the first quarter of 2025, the total retirement asset scale in the U.S. is $43.4 trillion, accounting for about 34% of household financial assets. Among them, the total asset scale of the U.S. 401(k) plan reaches $8.7 trillion, accounting for about 20% of the total retirement asset scale, covering over 90 million participants. In 401(k) plans, mutual funds manage assets worth $5.3 trillion, accounting for 61%; of which equity funds account for $3.2 trillion, and hybrid funds hold about $1.4 trillion.
Source: https://www.ici.org/statistical-report/ret_25_q1
From an investment composition perspective, 401(k) assets are mainly invested through mutual funds, accounting for as much as 61%. The funds are primarily allocated to traditional financial assets, with stock assets dominating.
Equity Funds: Approximately $3.2 trillion, accounting for 37% of total 401(k) assets, is the most significant allocation category.
Hybrid Funds: Approximately $1.4 trillion, which includes balanced products like Target Date Funds that automatically adjust asset proportions.
The remaining assets are distributed among bond funds, stable value funds, money market funds, and corporate stocks.
Overall, the core of 401(k) investment portfolios consists mainly of publicly traded assets, with minimal involvement in alternative assets such as private equity, commodities, and real estate, and no direct allocation to cryptocurrencies like Bitcoin. This traditional allocation model is expected to undergo a historic shift under the new policies of the Trump administration.
3. The 401(k) Investment Landscape Enters the 'Alternative Assets' Era
On August 7, Trump signed an executive order allowing ordinary retirement investors to access alternative assets. The order requires the Department of Labor to lead a reassessment of the regulatory guidelines for investing alternative assets in 401(k) plans under the current Employee Retirement Income Security Act (ERISA) framework, collaborating with the Treasury Department, the Securities and Exchange Commission, and others to study whether related regulations need to be modified. The executive order explicitly defines 'alternative assets' as: private market investments, direct or indirect real estate interests, commodities and infrastructure projects, and digital assets (i.e., cryptocurrencies) held through actively managed vehicles. In other words, assets such as private equity funds, equity in unlisted companies, and digital assets like Bitcoin are now included in the allowed scope.
However, it is worth noting that this executive order does not immediately open up investments but rather initiates a regulatory revision process, with actual implementation likely not occurring until 2026. Even so, this policy shift itself sends a clear signal: the U.S. government is willing to endorse the entry of retirement funds into emerging fields such as crypto.
III. Attempts of Various Countries to Invest Pension Funds in the Crypto Market
The U.S. initiative to open pension investments in crypto also has symbolic significance globally. In general, large pension funds in various countries remain very cautious towards crypto assets, but in recent years, some 'trial and error' cases and lessons have emerged.
In Canada, the Ontario Teachers' Pension Plan (OTPP), with approximately $190 billion in assets, invested about $95 million in the cryptocurrency exchange FTX through a venture capital fund in 2021-2022. However, FTX's subsequent bankruptcy rendered this investment worthless, accounting for less than 0.05% of the fund's net assets. Although the amount was not large, the event caused a significant uproar: OTPP not only incurred losses but also faced a collective lawsuit from its retirees, accusing it of inadequate due diligence. This lesson led OTPP to state that it would avoid any crypto-related investments in the short term. Clearly, negative precedents can make institutions more conservative and serve as a warning to regulators.
In the U.S., a few public pension funds have also tried to venture into crypto. For instance, the Houston Firefighters' Retirement Fund invested $25 million in Bitcoin and Ethereum in October 2021, representing about 0.5% of its assets. The fund's management stated that they view cryptocurrencies as a new hedge and potential source of growth, not wanting to 'ignore' this emerging asset. Due to the small proportion, this investment did not significantly affect the overall portfolio. Similarly, two county retirement systems in Fairfax County, Virginia, have gradually allocated small amounts to blockchain since 2018 (about 3-5% of their investment portfolios), involving various forms such as blockchain venture capital funds and crypto yield farming.
In contrast, most mainstream pension plans in European and Asian countries have yet to include cryptocurrencies in their qualified investment scope. On one hand, many countries' pensions are more inclined towards government-led or fixed-income assets, with a lower risk appetite than corporate annuities in the U.S. and U.K. On the other hand, regulators in various countries impose strict limits on the investment scope of pensions, emphasizing 'responsible investment' of pension assets, thereby excluding the crypto market due to money laundering risks, volatility, and uncertainties. However, some private pension accounts with autonomous investment authority have begun to dabble in crypto. For instance, in Australia, some high-net-worth individuals have allocated Bitcoin through self-managed superannuation funds (SMSFs) as part of diversified investments. In this model, investment decisions are led by individuals, thus offering more flexibility, but it also presents challenges of insufficient expertise and regulatory blind spots. The U.K.'s self-invested personal pensions (SIPPs) have also seen cases of purchasing crypto derivatives, but the U.K. financial regulator has placed strict limits on retail investors buying crypto assets.
It is evident that global pensions are still in the exploratory stage regarding crypto assets. The U.S. opening up 401(k) investments in crypto will undoubtedly attract attention and discussion from regulatory authorities and the industry worldwide. If the U.S. practice proves successful, other countries may gradually follow suit and relax policies, allowing pensions to share in the dividends of the crypto economy. However, in the short term, it is more likely to be small-scale attempts by a few forward-thinking institutions, with a long way to go before widespread adoption.
IV. Opportunities and Challenges Brought by the Entry of 401(k) Funds
The opening of the 401(k) pension plan to alternative assets like cryptocurrencies will greatly enhance the return and diversification of pension portfolios. Supporters point out that in the past, ordinary workers' 401(k) plans could only buy mutual funds, while large institutions and wealthy investors could access high-yield fields like private equity and hedge funds, leading to an 'unfair' situation. Opening up the investment scope of 401(k) is expected to allow ordinary investors to 'start on the same starting line as institutions,' sharing the potential appreciation of private markets and crypto assets.
For the cryptocurrency market, the entry of 401(k) pensions will not only bring an increase in capital but also symbolize a qualitative change.
Increase in capital: Once the policy is implemented, it means that the dam of U.S. retirement savings will open a gap, allowing some funds to flow into crypto assets. Considering that the 401(k) plan manages an asset pool of nearly $9 trillion, while the current total value of cryptocurrencies is $4 trillion, if 10% of the funds are allocated to the crypto field, it would amount to nearly $900 billion in potential incremental capital inflow, equivalent to 22% of the current total market value of cryptocurrencies, which is sufficient to significantly support prices. This change in capital dynamics is undoubtedly a significant boon for the long-term development of the crypto market.
Source: https://www.tradingview.com/symbols/TOTAL
Increased recognition among institutional investors: The 401(k) plan is overseen by company fiduciaries and professional advisors, who typically make asset choices very cautiously. Once crypto assets are formally included as mainstream pension options, it will greatly enhance the status of cryptocurrencies like Bitcoin as mainstream investment products, attracting more institutions that have previously been on the sidelines to participate, forming a positive cycle. Fidelity Investment announced as early as 2022 its plan to offer Bitcoin investment options to its 401(k) clients (which was temporarily delayed due to regulatory concerns), and now that the policy barriers have been removed, these products are expected to be quickly launched into the market. It is anticipated that crypto investment tools specifically designed for retirement plans will gradually emerge, such as Bitcoin trust funds for 401(k) and crypto index funds, or even embedding a small amount of crypto exposure in target date funds.
Improving investor structure: Pension funds have long-term stability characteristics, which are expected to improve the investor structure in the crypto market and reduce extreme volatility. Unlike retail investors chasing short-term gains, pension allocations focus on long-term stable appreciation and risk diversification, meaning they will not frequently enter and exit on a large scale. This implies that if a portion of 401(k) assets is allocated to Bitcoin, it will exist as 'long-term holders,' reducing circulation and enhancing market stability. Of course, this effect will take a considerable amount of time and sufficient scale to manifest, but it holds positive significance in direction.
Promoting the integration of traditional finance and crypto finance: As retirement advisors, custodial banks, and fund companies begin to develop crypto products for 401(k), the infrastructure for compliance, custody, and security in the crypto industry will also improve accordingly. For example, to meet 401(k) requirements, custodians must address issues such as private key custody and theft risks, and liquidity arrangements needed for trading. The entry of traditional financial institutions will accelerate the establishment of unified standards and best practices in the industry, such as valuation models, performance reporting formats, and fee standards. All of these will enhance the friendliness of crypto assets towards mainstream funds.
However, the policy relaxation also faces a series of challenges:
Cost and liquidity issues: The trend of 401(k) plans over the past few decades has been to reduce costs, widely adopting low-fee index mutual funds, with average management fees dropping to 0.26%. In contrast, private equity funds typically charge '2% management fees + 20% performance incentives,' and the fees for crypto investment products are generally higher, necessitating careful design of how to introduce such assets into 401(k).
Risks and information transparency: Traditional public market investments have relatively complete information disclosure and regulation, while private markets and crypto assets face more severe information asymmetry and volatility.
Legal liabilities and litigation risks: It may trigger collective lawsuits from employees. Without clear legal protections, planned fiduciaries and asset managers may be reluctant to venture into these highly volatile areas.
Investor education challenges: Continuous education and guidance are needed to help ordinary participants understand the risk-return characteristics of assets like Bitcoin, the allocation proportions, and their alignment with retirement goals; otherwise, issues such as blind following and exposure to volatility beyond risk tolerance may arise.
For the cryptocurrency industry, welcoming traditional pension funds is both a huge opportunity and a significant challenge. The ability to provide investment tools that reassure regulators and investors, and to demonstrate value within a strict fiduciary responsibility framework, will determine how far and how fast this long-term capital can go. Nevertheless, once this door has been opened even slightly, it is hard to close it again. Looking ahead to the next decade, as Millennials and Gen Z gradually become the main participants in pensions, their acceptance of digital assets is higher, coupled with advancements in technology and regulation, the proportion of crypto assets in pension portfolios is likely to gradually increase. This will further drive the expansion of the crypto market and the evolution of its ecosystem, and perhaps one day, crypto assets may become an indispensable part of retirement wealth allocation, just like gold or real estate.
V. Conclusion and Outlook: Is the Crypto Market Riding the Wind?
The market widely expects the Fed to announce its first interest rate cut of the year at the September meeting. According to trading data, the probability of a 25 basis point rate cut in September is nearly 100%, with some even betting on a possible 50 basis point cut. The turning point for monetary easing is evident, and the atmosphere of shifting from 'hawk' to 'dove' is growing stronger. As this rate cut is seen as the beginning of a long-term trend reversal and the start of a series of policy easing, its medium- to long-term support for risk assets may become more significant. If the Fed continues to cut rates and re-expands its balance sheet to provide liquidity, then what the crypto market is facing may not just be a 'breeze' but rather a prolonged 'period of benefaction.'
The favorable news regarding 401(k) access to the crypto market coincides with the macro favorable news of the Fed's interest rate cuts, creating a resonance in timing. The former brings structural incremental funds and long-term buying pressure, while the latter creates an overall favorable funding environment and an increase in risk appetite. These two forces complement each other and are expected to shape a new upward trend in the crypto market. The potential entry of pension funds means that cryptocurrencies are expected to transition from being marginal assets to becoming part of mainstream asset allocation; the shift in the interest rate environment provides fertile soil for a new bull market. In the 2025 time window, we may be witnessing a critical step towards the maturity of the crypto industry—from being speculative products for a few geeks and institutions to becoming part of the pension funds of billions of people.
For investors, it is essential to maintain confidence in long-term trends while being cautious of short-term market fluctuations and uncertainties. The entry of pensions into the market is still on the eve of policy implementation, and there may be twists and turns during the process; although the Fed's policy has turned towards easing, the macroeconomic trajectory still has variables. Just as the market anticipates, perhaps the crypto spring has arrived, but we must also learn to sow in spring and reap in autumn.
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