To the Moon After All? DOL Targets Cryptocurrency in Retirement Plans

In Compliance Assistance Release No. 2022-01 (the “Release”), the Department of Labor (the “Department”) signaled its intention to scrutinize inclusion of cryptocurrency assets and crypto-derivative products as investments in ERISA-covered retirement plans.  In particular, the Release articulates the Department’s view that offering exposure to this asset class – either in a plan’s investment lineup or via a brokerage window – may run contrary to ERISA’s fiduciary principles.

The Release outlines the Department’s myriad concerns and highlights a Securities and Exchange Commission finding that cryptocurrency is “highly speculative.”  The Department also indicates that the market for crypto assets can be volatile and rife with fraud.  Moreover, the Department is concerned about the ability to accurately value and recordkeep digital currencies.  The Release also suggests that the lure of cryptocurrency gains may mislead participants into losses.

The Release does not carry the force of law, although it heralds an unprecedented shift in Department enforcement against an entire asset class.  The Department also indicated that its investigations would include investment options available through brokerage windows.  In all, the Release provides:

[The Department] expects to conduct an investigative program aimed at plans that offer participant investments in cryptocurrencies and related products, and to take appropriate action to protect the interests of plan participants and beneficiaries with respect to these investments.  The plan fiduciaries responsible for overseeing such investment options or allowing such investments through brokerage windows should expect to be questioned about how they can square their actions with their duties of prudence and loyalty in light of the risks described [by the Release].

For more information, please see the Release.