Crypto’s qualification for 401(k) retirement accounts faces scrutiny following significant market decline that erased $2 trillion.

"401ks are intended to assist individuals in saving for a secure retirement, not to speculate on volatile assets," remarked an industry expert.

Crypto retirement plan in question after brutal selloff (Getty Images)

Key points:

• "401ks are designed to assist individuals in saving for a secure retirement, not to wager on speculative assets," stated Lee Reiners from the Duke Financial Economics Center.
• "Last week, we did not exit swiftly because the fundamental data still appeared robust," mentioned BlockTrust IRA, an AI-powered fund provider collaborating with pensions.
• Tokenization and smart contracts are transforming the future of the retirement sector, according to Franklin Templeton.

The 50% drop in Bitcoin from its peak in October has not only wiped out $2 trillion in market capitalization but has also reignited a heated discussion regarding the fiduciary principles of the American retirement framework.

As investors rush to analyze the factors behind the recent decline, industry analysts are questioning whether volatile digital assets belong in a $12.5 trillion 401(k) market that is structured for stability.

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“If investors wish to speculate on crypto, they are free to do so independently. 401ks are meant to help individuals save for a secure retirement, not to gamble on speculative assets lacking inherent value,” remarked Lee Reiners, a lecturing fellow at the Duke Financial Economics Center and co-host of the Coffee & Crypto podcast.

U.S. President Donald Trump signed an executive order in August permitting 401(k) and other defined-contribution retirement plans to access alternative assets, including digital currencies. Even Securities and Exchange Commission (SEC) chair Paul Atkins mentioned last week, just before the recent significant crypto market decline, that “the time is right” to allow the retirement sector to adopt crypto.

However, the recent downturn in crypto may deter retirement fund managers from pursuing plans to introduce crypto into 401(k)s.

Reiners noted that several prominent crypto firms, such as Coinbase (COIN), are already part of major equity indices, which indicates that many 401(k) plans already possess indirect exposure to crypto, and that should suffice.

“Unless Congress amends the law, plan sponsors are unlikely to incorporate crypto or ETFs as options since they are hesitant to face lawsuits from their employees. For any employers who were contemplating it, I am certain that recent events have prompted them to reconsider,” Reiners stated.

The challenge of investing individuals’ life savings in crypto stems from the industry’s relative youth and extreme volatility, while pension funds are intended for stable growth.

Holding investments can be effective for assets like the S&P 500, which experiences significant volatility primarily during Black Swan events, such as the 2008 financial crisis or uncertainties surrounding COVID-19. However, due to the scale of traditional markets, the government frequently intervenes to stabilize conditions, and various regulatory frameworks are in place to safeguard individuals’ investments.

Conversely, much of crypto’s activity is merely speculative, leading to potential price fluctuations over a weekend or a week that can rapidly erase billions in value without regulatory supervision over market movements. This situation makes it even more concerning for investors to allocate their life savings to such assets.

Didn’t ‘get out quickly’

To illustrate the uncertainty, many firms likely found themselves caught off guard by the abrupt decline in bitcoin and crypto in recent days.

In fact, the recent severe selloff was so abrupt and intense that BlockTrust IRA, an AI-driven retirement platform that has added $70 million in IRA funds over the past year, was caught in the turmoil.

“Sometimes we evaluate situations and decide, ‘you know what, we should exit,’ and at times we do not. Last week, we did not exit promptly because much of the fundamental data we analyze remains very strong,” stated Chief Technical Officer Maximilian Pace in an interview with CoinDesk.

Nevertheless, concerning the sudden plunge, Pace attributed the firm’s “broad sense of analytics,” which functions effectively over longer periods compared to short-term trading. This approach enabled it to outperform in 2025, and the firm added that it has “not been swayed by volatility.” The AI trading firm’s Animus Fund surpassed bitcoin’s performance throughout 2025 and recorded a 27% increase from January to December 2025, while the bitcoin buy-and-hold strategy experienced a decline of 6% to 13% during the same timeframe, as stated in a press release from the firm.

In Pace’s perspective, adopting a long-term view of crypto investments over a five- to 10-year horizon is the appropriate mindset for 401(k) plans.

“It would be more beneficial to think like a venture capitalist rather than a day trader,” Pace remarked. “There are strategies for mitigating investment risk, either from a time perspective or from a strategic viewpoint, that enhance their appeal or acceptability for 401(k) programs. However, like any investment, there are risks involved.”

The future of pensions

There may be a need to broaden the perspective and consider the underlying blockchain technology for retirement investment management, rather than simply investing in tokens.

Robert Crossley, Franklin Templeton’s global head of industry and digital advisory services, is contemplating just that. He believes the retirement sector, which is often isolated, slow-moving, and over-regulated, could be transformed by on-chain wallets that manage tokenized assets.

By doing this, an individual’s digital wealth can be better aligned with other aspects of their financial life, Crossley noted.

"Whether you are saving, investing, or spending, you engage in various financial activities that are currently managed differently by different providers in your life," Crossley explained in an interview.

If regulations are established that do not hinder innovations, it is likely that blockchain technology could eliminate the fragmentation caused by intermediaries. The industry could see a rise in wallets that "unlock the potential of programmable assets and securities, allowing users to view and manage all their assets in one place without intermediaries,” he stated.

“When something is tokenized, it becomes software. This software can represent an asset, but it can also serve as a benefit or a liability. It could encompass an entire 401(k) or your whole defined contribution plan,” Crossley remarked.