Smaller cryptocurrencies could eventually reach US 401(k) retirement accounts under a proposed rule from the Labor Department, though industry experts caution that tokens beyond Bitcoin (BTC) and Ether (ETH) may face steeper hurdles.

The rule advanced to the White House for final review on Thursday, according to the Office of Information and Regulatory Affairs. It is designed to make it easier for retirement plans to offer alternative investments such as crypto, while giving employers and plan managers added legal protection. The measure matters well beyond crypto markets: 401(k) plans are the primary employer-sponsored retirement savings vehicle for millions of American workers, so the rule could determine whether a major pool of US household retirement savings gains easier access to digital assets.

Drafted in March, the Labor Department proposal does not name which digital assets could qualify, and it sets no minimum market capitalization threshold. Instead, it directs retirement plan managers to weigh six factors in their selection: performance, fees, liquidity, valuation, benchmarks and complexity.

While the proposal could widen the range of cryptocurrencies available in retirement plans, inclusion is not guaranteed. Experts note that smaller tokens may struggle because of their limited track record, thinner liquidity and other risks.

Why smaller cryptocurrencies could face challenges

Teresa Goody Guillén, managing partner at Bellementis PLLC, said Bitcoin and Ether are likely to be the first cryptocurrencies offered through 401(k) plans, given their established markets and investment products. The two assets are the largest cryptocurrencies by market capitalization, at roughly $1.5 trillion and $273 billion respectively, according to CoinGecko data as of 20:01 UTC on Nov. 6.

That does not automatically shut out altcoins, she said. Rather, those managing 401(k) plans would need to demonstrate that their investment choices are prudent.

"The real question isn't which cryptocurrencies regulators pick – it's whether an investment meets the same standards of prudence, liquidity, valuation and investor protection as any other retirement option," Guillén said.

Market capitalization matters, she added, but it should not be the deciding factor. "Big doesn't mean suitable, and small doesn't mean disqualified," Guillén said. "Digital assets shouldn't get special treatment, or be excluded because they use different technology."

Bernardo Brites, co-founder and CEO of Trace Finance, voiced a similar assessment: "Run any token through that list and the answer is short. Bitcoin passes clearly. Ether passes; everything else fails on track record or benchmark before a fiduciary ever gets to market cap."

In that framework, market cap carries weight only indirectly, Brites explained. "The practical test is simpler: can a plan committee document a daily, reliable price from a regulated wrapper?" he said. "If not, it is not going in."

ETFs could come before direct crypto holdings

Although the Labor Department proposal does not confine crypto exposure to exchange-traded funds (ETFs) or managed funds, experts expect those vehicles to arrive ahead of direct token holdings.

"ETFs and managed funds will likely come first because they fit existing custody and recordkeeping systems," Guillén said. Holding cryptocurrencies directly, by contrast, would raise additional concerns around storage, cybersecurity and pricing — although she noted those risks should not automatically rule direct holdings out.

Brites likewise anticipates a gradual rollout. Existing brokerage options would likely come first, he said, followed by standalone ETFs and funds that hold small amounts of crypto. He expects some crypto investment options to become available in 2027, with ETFs at larger employers later that year and wider availability across retirement funds by 2028.

"The rule changes the legal risk, not the plumbing, and the plumbing is slower," Brites said. "White House review can take up to ninety days, then publication, then an effective date typically sixty days later."

Legal uncertainties remain

Legal uncertainty could also slow adoption, Brites said. The proposal would offer retirement plan managers some protection from lawsuits, but it would not prevent them from being sued over their investment decisions. As fiduciaries under the federal pension law that governs 401(k) plans, managers are bound to act prudently and in participants' best interests — the standard against which such lawsuits would test their choices.

He further warned that future administrations could reverse the rule — a possibility that could make employers hesitant to add crypto to long-term retirement plans.

"The 2022 guidance was reversed in 2025; a fiduciary signing a ten-year plan design has to consider that this rule could be reversed too," he said. "And with courts giving less deference to agencies, how much weight the safe harbor carries in litigation is itself unsettled."

The near-term watchpoints are the rule's final text and how the safe harbor holds up in practice — details that could shape how quickly crypto options reach retirement plan menus, on the timeline Brites outlined.

Source: Cointelegraph