Sebastian Sinclair

<div id="highlights-block_62aa8aecc7572" class="highlights">
 <ul>
 <li>The US President&#8217;s executive order calls for a unified approach to crypto regulation and innovation</li>
 <li>The Crypto Council for Innovation said Wednesday the Department of Labor&#8217;s guidance, issued in May, takes a one sided-approach to the nascent asset class</li>
 </ul>
 
</div>



A crypto industry body in the US is urging the Department of Labor (DOL) to reconsider its crypto guidance for retirement plans, amid mounting pushback from concerned community members.



The Crypto Council for Innovation (CCI) said Wednesday the DOL&#8217;s guidance is inconsistent with directives from the White House and President Biden’s Executive Order for the nascent asset class.



In a <a href="https://cryptoforinnovation.org/wp-content/uploads/2022/06/Crypto-Council-for-Innovation-Department-of-Labor-Response-Letter_Final.pdf" target="_blank" rel="noreferrer noopener">letter</a> penned to the department&#8217;s Acting Assistant Secretary Ali Khawar, CCI is asking DOL to rescind its Release <a href="https://www.dol.gov/newsroom/releases/ebsa/ebsa20220310" target="_blank" rel="noreferrer noopener">No. 2022-01 guidance</a>, issued in March, that precludes 401(k) administrators from including crypto investment options in their plans.



Regulators are now weighing up whether to issue an official rule that would address the appropriateness of crypto in 401(k) plans, <a href="https://news.bloomberglaw.com/daily-labor-report/401k-crypto-investment-restrictions-eyed-by-labor-regulators" target="_blank" rel="noreferrer noopener">Bloomberg reported</a> Wednesday.



DOL&#8217;s guidance imposes a higher standard of care for crypto when compared to other financial options for 401(k)s by taking a one-sided and highly negative view, according to CCI.



The DOL is tasked with overseeing the security of the retirement, health and other workplace-related benefits of US employees.



It comes as the department stares down a legal challenge by 401(k) provider <a href="https://cms.blockworks.co/labor-dept-crypto-guidance-is-arbitrary-and-capricious-forusall-lawsuit-alleges/" target="_blank" rel="noreferrer noopener">ForUsAll</a>, which filed its lawsuit earlier this month claiming the department&#8217;s move to restrict the use of crypto in retirement plans is “arbitrary and capricious.”



A month after the DOL&#8217;s guidance was issued, Boston-based financial services provider <a href="https://cms.blockworks.co/fidelity-delves-deeper-into-crypto-by-allowing-bitcoin-in-401ks/" target="_blank" rel="noreferrer noopener">Fidelity Investments</a> moved to allow individuals to allocate a portion of their retirement savings to bitcoin through the company’s 401(k) investment lineup.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">&#8220;CCI is deeply concerned&#8230;based on a factually and legally flawed analysis,&#8221; the council said in its letter. &#8220;We also urge the Department to commence a more open, inclusive and deliberative process to develop guidance for the inclusion of crypto assets on 401(k) investment menus.&#8221;</blockquote>



President Biden’s &#8220;<a href="https://cms.blockworks.co/biden-signs-crypto-executive-order-promoting-responsible-innovation/" target="_blank" rel="noreferrer noopener">Executive Order</a> on Ensuring Responsible Development of Digital Assets&#8221; signed in March of this year, calls for a unified approach to regulating and evaluating cryptocurrencies. 



It marked the first time the executive branch signed such an order for the industry and was welcomed by investors and businesses alike, though it fell short of providing clearer regulatory guidelines many were asking for.



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401(k)

US Labor Dept. Urged to Rescind Crypto Guidance as Pushback Grows

Ben Strack

<div id="highlights-block_6298e85f51b02" class="highlights">
 <ul>
 <li>The Department of Labor in March published compliance assistance for 401(k) plans considering crypto investments</li>
 <li>Fidelity revealed in April that it would permit individuals to allocate a portion of their retirement savings to bitcoin</li>
 </ul>
 
</div>



401(k) provider ForUsAll filed a lawsuit against the US Department of Labor in federal court Thursday, claiming that the agency’s attempt to restrict the use of cryptocurrency in retirement plans is “arbitrary and capricious.”



The suit seeks to prevent the government agency from restricting the types of investments Americans can make within a self-directed brokerage account (SDBA), according to <a href="https://resources.forusall.com/Dkt.%20001%20ForUsAll%20Complaint.pdf" target="_blank" rel="noreferrer noopener">the complaint</a>.



The lawsuit comes after the Department of Labor (DOL) in March <a href="https://www.dol.gov/newsroom/releases/ebsa/ebsa20220310" target="_blank" rel="noreferrer noopener">published compliance assistance</a> for 401(k) plans considering crypto investments and threatened to investigate those that offer such options.



“At this stage of cryptocurrency’s development, fiduciaries must exercise extreme care before including direct investment options in cryptocurrency,” Employee Benefits Security Administration’s Acting Assistant Secretary Ali Khawar said in a statement at the time.



ForUsAll CEO Jeff Schulte noted in a statement that SDBAs have for decades allowed 401(k) holders the ability to invest in a broader range of investments than what is offered by their employers’ fund lineup.&nbsp;



“But now the DOL is trying to change the rules overnight, attempting to restrict the types of investments individuals can choose to make, despite having no legal authority to do so — all because they don’t like a single asset class,” he said. “We won’t stand by while they restrict everyday Americans’ ability to make the most of their hard-earned money.”



A ForUsAll spokesperson told Blockworks the company is hoping for a quick decision, given the concerns expressed in an <a href="https://nam04.safelinks.protection.outlook.com/?url=https%3A%2F%2Fforusall.mxcypress.com%2F6075b737c4fa7570848205fc%2Fl%2FfHNg7R3S3QUOOfLH9%3FmessageId%3DjudtWMga6xFX7V4uN%26rn%3DgIsxWQzVlcvZkI%26re%3DISbvNmLhlGZl1WawJGQsxWYzVncvZmI%26sc%3Dfalse&amp;data=05%7C01%7CSArpin%40bpimedia.com%7Ca325672838a046024e7b08da44b5948a%7Cab457ec51e6c4dd99f08ea5b5fdcfeb5%7C1%7C0%7C637897843921018641%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&amp;sdata=%2FxnLSWvruWhmswlYuIPsnsAS3pg3r48kUIVLLiaV9tA%3D&amp;reserved=0" target="_blank" rel="noreferrer noopener">open letter</a> from players in the traditional 401(k) industry to Khawar. 



ForUsAll <a href="https://cms.blockworks.co/retirement-investment-provider-introduces-alt-401k/" target="_blank" rel="noreferrer noopener">began allowing</a> employers to provide alternative investment options within 401(k) plans last year. The company noted that it would be using Coinbase Institutional for the custody and exchange of digital assets. 



Financial services giant Fidelity Investments <a href="https://cms.blockworks.co/fidelity-delves-deeper-into-crypto-by-allowing-bitcoin-in-401ks/" target="_blank" rel="noreferrer noopener">announced</a> in April that it would permit individuals to allocate a portion of their retirement savings to bitcoin through its 401(k) platform.



Schulte told Blockworks at the time that crypto access in 401(k) plans is inevitable, adding that he expected <a href="https://cms.blockworks.co/will-competitors-follow-fidelitys-lead-in-401k-bitcoin-offering/" target="_blank" rel="noreferrer noopener">other large institutions to follow</a> Fidelity’s lead over time. 



Fidelity’s announcement was met with opposition from Sens. Elizabeth Warren, D-Mass., and Tina Smith, D-Minn., who wrote a letter to Fidelity CEO Abigail Johnson last month, calling crypto investments “a risky and speculative gamble.”



Fidelity privately responded to the senators to address some of their concerns, a spokesperson told Blockworks.&nbsp;



“The [Digital Asset Account] offering features several institutional consumer safeguards including but not limited to, excessive trading oversight, investing limits, transparency, market-leading education, and cyber-security features,” the representative said. “Fidelity looks forward to continuing the dialogue on this exciting offering with federal regulators and policymakers consistent with our approach to many new services we offer our customers.”



Moe Vela, a former advisor to then-Vice President Joe Biden, said he believes many cryptoassets, including bitcoin, are not optimal for retirement plans because of their inherent volatility, vulnerability and lack of predictability.&nbsp;&nbsp;



“I believe it would be prudent to mitigate risks at all times by seeking to invest in cryptocurrencies that are backed by real assets and transparent in their infrastructure and operations,” he told Blockworks.&nbsp;&nbsp;



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“At the same time, I respect the right of workers, retirees and pension fund managers to choose how they invest their funds.”</blockquote>



Sen. Tommy Tuberville, R.-Ala., last month <a href="https://www.tuberville.senate.gov/newsroom/press-releases/new-tuberville-legislation-promotes-financial-freedom-for-401k-investors/" target="_blank" rel="noreferrer noopener">introduced the Financial Freedom Act</a>, which would prohibit the DOL from limiting the type of investments that self-directed 401(k) account investors can choose through a brokerage window.



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