Old but gold: Can digital assets become part of Americans’ retirement plans?
On March 11, the United States Department of Labor warned employers that sponsor 401(k) retirement plans to “exercise extreme care” when dealing with cryptocurrencies and other digital assets, even threatening to pay extra legal attention to retirement plans with significant crypto investments.
Its rationale is familiar to any crypto investor: The risk of fraud aside, digital assets are prone to volatility and, thus, may pose risks to the retirement savings of America’s workers. On the other hand, we are seeing established players in the retirement market taking steps toward crypto. For one, retirement investment platform ForUsAll decided last year to implement crypto as an investment option for 401(k) fixed retirement accounts in partnership with Coinbase. Is this the beginning of a larger trend?
Apart from the simplistic explanation that digital assets have the magical ability to make people extremely rich in a short period, there are two serious points to consider regarding crypto and retirement investments.
The first is investment diversification. At least for now, cryptocurrencies, nonfungible tokens (NFTs) and other digital assets possess relative autonomy from the larger traditional financial market. In some cases, this could make them relatively stable when equity and other traditional markets are in turmoil.
A second, perhaps more pragmatic, point is that one doesn’t have to pay the same amount of taxes when buying and trading crypto via a retirement plan. This is a matter of both profit and time — each time an American investor makes money from selling cryptocurrency, they are required to record it to report to the Internal Revenue Service. Retirement accounts are, as a rule, exempt from that burden. As Dale Werts,
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