Labor Ends Biden Policy in Move to Allow Bitcoin in 401Ks

The U.S. Department of Labor announced an unwinding of a Biden administration policy of discouraging fiduciaries from including cryptocurrency investments in retirement plans.

"The Biden administration's Department of Labor made a choice to put their thumb on the scale," Secretary of Labor Lori Chavez-DeRemer wrote in a statement Wednesday. "We're rolling back this overreach and making it clear that investment decisions should be made by fiduciaries, not D.C. bureaucrats."

Biden's policy directed retirement plans to exercise "extreme care" before adding cryptocurrency to investment menus, and President Donald Trump's Labor Department argues the language deviated from the requirements of the Employee Retirement Income Security Act and marked a departure from the department's historically neutral, principled-based approach to fiduciary investment decisions.

"By rescinding the 2022 guidance, the department reaffirms its neutral stance, neither endorsing, nor disapproving of, plan fiduciaries who conclude that the inclusion of cryptocurrency in a plan's investment menu is appropriate," the department wrote in the announcement that comes amid the Bitcoin conference this week in Las Vegas.

The Trump administration has vowed to make America the world leader and the "Bitcoin capital of the world" and Vice President JD Vance is speaking at the conference Wednesday in a headlining speech that will air at least in part on Newsmax.

Institutional adoption of cryptocurrencies are increasing a priority by America's big banks, who are holding internal discussions about expanding into cryptocurrencies as they get stronger endorsements from regulators.

Wall Street giants that had been largely blocked from many crypto activities by strict regulations are poised to grow quickly and there remains longtime crypto skeptics in leadership like JPMorgan Chase CEO Jamie Dimon.

"When I look at the Bitcoin universe, the leverage in the system, the misuse in the system, the money laundering issues, trafficking, I'm not a fan of it," Dimon told investors last week. "We're going to allow you to buy it, we're not going to custody it.

"I don't think you should smoke, but I defend your right to smoke. I defend your right to buy Bitcoin," he added.

Trump vowed to become the first "crypto president" before he took office. He has since wooed the industry's elite at the White House, promised to boost the adoption of digital assets and said he aims to create a strategic bitcoin reserve.

While there are welcoming signs, banks are seeking even clearer guidelines from the government clarifying what they can do in crypto, more than half a dozen industry executives said.

"The shift in the stance is encouraging for traditional lenders, but they are still approaching it with caution and viewing the changes in regulation as an opportunity to engage and not a free pass," said Dario de Martino, A&O Shearman M&A partner who works on crypto-related issues.

Custody businesses to store and manage crypto assets are promising, bankers and executives said, but they have thin margins and potentially pose high risks.

Most banks are likely to enter custody businesses through partnerships with existing crypto firms, sources said.

Charles Schwab CEO Rick Wurster told Reuters earlier this month that the traffic lights from financial regulators were flashing "pretty green" for large firms to grow in crypto. The signals have reinforced Schwab's plans to offer spot crypto trading within a year, he said.

New regulators under Trump have also signaled more bank-friendly crypto policies. The U.S. Office of the Comptroller of the Currency paved the way for lenders to engage in some crypto activities, such as custody, some stablecoin activities and participation in distributed ledger networks.

The Securities and Exchange Commission also scrapped earlier accounting guidance that made it expensive for banks to deal in crypto.

Bank of America could launch stablecoins, its CEO Brian Moynihan said earlier this year, and the U.S. banking industry will embrace cryptocurrencies for payments if regulations permit them.

Meanwhile, Morgan Stanley wants to work with regulators to see how it can be a middleman for crypto-related transactions, CEO Ted Pick said earlier this year. The lender is also exploring adding crypto to its e-trade platform, a source said.

Some of the large banks are also exploring issuing a joint stablecoin, with the conversations in initial stages, another banking source said.

"While a much-improved environment, banks will continue to have concerns around anti-money laundering and regulatory compliance," said Matthew Biben, co-head of the global financial services group at law firm King & Spalding.

The working group on crypto under David Sacks, the Trump-appointed crypto czar, has no representation from banking regulators, which needs to be amended if the big banks are allowed to play any meaningful role in the business, two banking sources said.

Material from Reuters was used to compile this report.