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MarketWatch posted that the Trump administration is rescinding Biden administration’s guidance that discouraged cryptocurrency investing by 401(k) plans.
The 2022 guidance directed plan fiduciaries to exercise “extreme care” before adding cryptocurrency to investment menus. That caution has now been removed.
I’m thinking removing urging “extreme care” for 401k plans is not such a good idea. Is the 401k the place for such an investment?
How many people actually understand cryptocurrency? Not me
I can just see some employees (like the ones taking the financial literacy test) jumping on the bandwagon if they have the opportunity.
There are two challenges to be aware of with crypto:
The S&P 500 index now has cryptocurrency with the addition of COIN, currently 0.1% cap weight of the index. All funds or ETFs that track this index now own crypto. Since my 401K and Rollover IRA investments use a variety of indexes (for example Vanguard’s VTI uses CRSP US Total Market Index), I cannot say with any confidence that I own digital asset or not in answering the IRS tax return question for 2025.
The IRS currently has a digital checklist to help taxpayers answer the question.
https://www.irs.gov/filing/determine-how-to-answer-the-digital-asset-question
I wonder if the digital question will disappear in the 2025 version of tax returns. If everyone answers yes the compliance value of the question to the IRS is likely diminished.
Why would “everyone” answer yes? The questionnaire you link to does not mention mutual funds (or stock of companies that hold crypto for that matter), only ETFs. And if you select the item that mentions ETFs, the result tells you to reply “no” to the question.
It really doesn’t matter what the president says in this case, he doesn’t make the rules about 401k investments. The guidelines set out by legislation like ERISA will continue to determine what is eligible for 401k investments. This is just more hot air, and means nothing. I would doubt a large amount of people are interested in having crypto in their 401k. Maybe as some sort of fund at the most, but even then.
The Department of Labor administers portions of ERISA including fiduciary responsibility and liability. I think it does matter. It sets a tone.
Charlie Munger, the late vice chairman of Berkshire Hathaway, was famously and intensely critical of cryptocurrency, particularly Bitcoin. His opposition was both consistent and colorful throughout the years.
Munger’s most memorable critiques included describing Bitcoin as “rat poison” and later, as its price rose, calling it “more expensive rat poison.” He was even more harsh in other comments, referring to cryptocurrency trading as “disgusting.”
His philosophical objections went beyond just price concerns. “Of course I hate the bitcoin success,” Munger said at Berkshire’s 2021 annual meeting, calling it “disgusting and contrary to the interests of civilization.” He viewed Bitcoin as “worthless, artificial gold” and characterized cryptocurrency more broadly as “crazy, stupid gambling.”
Munger also expressed concerns about cryptocurrency’s potential societal harms, describing it as “good for kidnappers” and calling it “a malicious combination of fraud and delusion.” He believed “The country did not need a currency that was good for kidnappers.”
His stance was unwavering even as crypto gained mainstream adoption. At a 2021 event, he called Bitcoin’s success “detestable” and maintained that “people who oppose my position are idiots.”
Munger’s criticism aligned with his and Warren Buffett’s value investing philosophy, which focused on buying and holding productive assets with intrinsic value – something he believed cryptocurrencies fundamentally lacked.
I agree with Charlie and am disappointed folks may invest in cryptocurrency as a part of their retirement.
Trump’s constituency is, at least in part, crypto bros so it really shouldn’t be a surprise. Obviously potential for huge volatility and a non-negligible chance of total loss in one or more currencies or platforms once people start running for the exit.
On the other hand maybe a moonshot as a small allocation within a well diversified portfolio might pay off for some (and not totallly harm the others). But you’d have to understand that and it not being about going all in on potential 20x bangers.
I always think of this cartoon when I hear anyone evangelising crypto
https://images.app.goo.gl/grBBPEM8T7ELzyjQ7