What Is a 401(k), and What Does Trump’s Crypto Retirement Policy Really Mean?

Introduction

TradingKey - On August 7, 2025, U.S. President Donald Trump signed a landmark executive order allowing 401(k) retirement plans to invest in cryptocurrencies. The move sent shockwaves through global financial markets, breaking long-standing boundaries in asset allocation and potentially unlocking trillions of dollars in long-term capital for the crypto sector.

This article breaks down what a 401(k) is, what Trump’s new policy entails, and how it could reshape the future of digital assets and retirement investing.

What Is a 401(k)?

A 401(k) is the most widely used retirement savings plan in the U.S., governed by Section 401(k) of the Internal Revenue Code. It allows employees to contribute a portion of their salary into a tax-advantaged account, typically invested in traditional assets like stocks and bonds.

There are two main types:

• Traditional 401(k): Contributions are tax-deferred; withdrawals in retirement are taxed
• Roth 401(k): Contributions are taxed upfront; withdrawals are tax-free in retirement

Employers often match contributions, and the funds grow over time to support retirement income.

Trump’s Executive Order: Opening the Door to Crypto

In a major reversal of prior policy, Trump’s order directs the Department of Labor, SEC, and Treasury to redefine what qualifies as a permissible asset in 401(k) plans. This includes Bitcoin, Ethereum, private equity, and real estate.

Previously, the Biden administration discouraged crypto in retirement accounts, citing volatility and regulatory uncertainty. But under Trump’s directive, Labor Secretary Lori Chavez-DeRemer emphasized that investment decisions should be made by fiduciaries — not the government.

The order also mandates inter-agency coordination to ensure regulatory alignment and implementation across federal bodies.

Market Impact: Crypto Rallies on Retirement News

Following the announcement, crypto markets surged:

• Bitcoin (BTC) rose over 2% to $119,000
• Ethereum (ETH) jumped 6%, breaking $4,600
• Ripple (XRP) gained 11%, Dogecoin (DOGE) rose 7%, and Solana (SOL) climbed 4%

While 401(k) funds haven’t yet flowed into crypto, analysts like Ryan Rasmussen of Bitwise estimate that even a 1–10% allocation could inject $80–800 billion into the market.

Risks and Controversies

Despite the bullish outlook, critics warn of serious risks:

• Jerry Schlichter, founding partner of Schlichter Bogard, argues that crypto’s volatility and lack of long-term performance history make it unsuitable for retirement savers
• Peter Schiff, economist and founder of SchiffGold, slammed the policy, saying: “Most Americans don’t have enough savings to retire. Now Trump wants them to gamble it on Bitcoin?”

Proponents argue the policy democratizes access to high-growth assets:

• Ji Hun Kim, CEO of the Crypto Council for Innovation, believes it positions the U.S. as the “global crypto capital”
• Matt Hougan, CIO of Bitwise, says steady inflows from retirement contributions could reduce volatility and improve long-term returns

Others, like Michael Heinrich of 0G Labs and Joshua Krüger of dEURO Association, take a more balanced view — acknowledging the upside while cautioning against underestimating the risks.

Conclusion

Trump’s 401(k) crypto policy marks a seismic shift in U.S. retirement investing. It could elevate digital assets into the mainstream financial system, attract institutional capital, and reshape how Americans build wealth.

But with greater opportunity comes greater risk. Whether this move leads to long-term prosperity or speculative excess will depend on how regulators, fiduciaries, and investors navigate the road ahead.