# Introduction

On August 7, 2025, Trump signed an executive order allowing 401(k) retirement pension plans to invest in alternative assets, including private equity, real estate, and cryptocurrencies. This move breaks the long-standing practice in the U.S. of limiting pension investments to stocks and bonds, opening the door for massive pension funds to enter the crypto market. The 401(k) plan is the primary corporate retirement system in the U.S., covering nearly 90 million American workers and managing trillions of dollars in assets. It is foreseeable that even a small portion of 401(k) funds flowing into the crypto market could have a significant impact on the current cryptocurrency market, which has a total market value of about $4 trillion. Following this news, combined with the Federal Reserve's anticipated interest rate cuts starting in September, cryptocurrencies like Bitcoin and Ethereum surged, further fueling the bull market.

This article will comprehensively analyze this significant policy change from multiple dimensions: first, reviewing the current state and investment landscape of the U.S. pension system and 401(k) plans, interpreting the background and potential impacts of the new policy; then, from a global perspective, comparing the exploratory experiences of other countries in pension investments in crypto and assessing the relevance of the U.S. model; next, analyzing the potential driving effects of this policy on the crypto market; finally, based on this, we will also look forward to changes in the crypto market landscape in light of the Federal Reserve's monetary policy shift, discussing the evolving role of crypto assets in future retirement wealth allocation.

# Understanding the U.S. 401(k) Pension Plan

1. The "Three Pillars" of the U.S. Pension System

The U.S. pension system consists of three main components:

• National-level Social Security: Managed by the federal government, it provides basic retirement income protection, covering almost all employed individuals, aimed at ensuring a basic standard of living after retirement.

• Employer-sponsored corporate pension plans: Represented by 401(k), primarily targeting private sector employees, it is the most common employer-sponsored retirement savings method in the U.S.

• Individual retirement accounts and annuities (IRAs & Private Annuities): Established and funded entirely by individuals, serving as supplementary retirement savings tools.

2. The Scale and Investment Composition of 401(k)

The 401(k) plan is an employer-sponsored retirement savings plan with tax advantages, primarily for private sector employees. The plan is mainly funded by employee contributions, where employees deduct a portion of their pre-tax wages to deposit into their 401(k) accounts, and employers typically provide a matching contribution, with specific ratios and rules set by the employer. Since its establishment in 1981, the plan has grown from a supplementary savings tool to the core pillar of the U.S. pension system and the largest corporate pension plan.

According to a report released by the Investment Company Institute (ICI) in June, as of the first quarter of 2025, the total retirement assets in the U.S. amounted to $43.4 trillion, accounting for about 34% of household financial assets. Among these, the total assets of the U.S. 401(k) plan reached $8.7 trillion, representing about 20% of total retirement assets, covering over 90 million participants. In 401(k) plans, mutual funds manage $5.3 trillion in assets, accounting for 61%; among them, equity funds account for $3.2 trillion, and mixed funds hold about $1.4 trillion.

Source: https://www.ici.org/statistical-report/ret_25_q1

In terms of investment composition, 401(k) assets are primarily invested through mutual funds, accounting for as much as 61%. Funds are mainly allocated to traditional financial assets, with equity assets dominating:

• Equity Funds: Approximately $3.2 trillion, accounting for 37% of total 401(k) assets, making it the primary allocation category;

• Hybrid Funds: Approximately $1.4 trillion, which includes balanced products like Target Date Funds that automatically adjust asset ratios;

• The remaining assets are distributed among bond funds, stable value funds, money market funds, and company stocks.

Overall, the core of the 401(k) investment portfolio is publicly traded assets dominated by stocks, with minimal involvement in alternative assets like private equity, commodities, and real estate, and no direct allocation to cryptocurrencies like Bitcoin. This traditional allocation model is expected to undergo a historic transformation under Trump's new policy.

3. The Era of "Alternative Assets" in 401(k) Investment Landscape

On August 7, Trump signed an executive order allowing ordinary retirement investors to access alternative assets. The order requires the Department of Labor to lead a reassessment of the regulatory guidelines for investing in alternative assets under the current Employee Retirement Income Security Act (ERISA) framework, collaborating with the Treasury Department, the Securities and Exchange Commission, and others to study whether modifications to relevant regulations are necessary. The executive order clearly defines "alternative assets" as: private market investments, direct or indirect real estate interests, commodities and infrastructure projects, and digital assets held through actively managed vehicles (i.e., cryptocurrencies). In other words, private equity funds, equity in unlisted companies, and digital assets like Bitcoin are all included in the permissible scope.

However, it is important to note that this executive order does not immediately open up investments but rather initiates a regulatory revision process, with actual implementation expected by 2026. Even so, this policy shift itself conveys a clear signal: the U.S. government is willing to endorse the entry of retirement funds into emerging fields like crypto.

# Attempts by Various Countries to Invest Pension Funds in the Crypto Market

The U.S. initiative to open pension investments in crypto also holds symbolic significance globally. Overall, large pension funds in various countries remain very cautious towards crypto assets, but in recent years, there have been some "small-scale trials" and lessons learned.

• In Canada, the Ontario Teachers' Pension Plan (OTPP), with approximately $190 billion in assets, invested about $95 million in the crypto exchange FTX through a venture capital fund in 2021-2022. However, FTX's subsequent bankruptcy rendered this investment worthless, accounting for less than 0.05% of the fund's net assets. Although the amount was not large, the incident caused a significant uproar: OTPP not only suffered losses but also faced a class-action lawsuit from its retired members, accusing it of inadequate due diligence. This lesson led OTPP to state that it would avoid any crypto-related investments in the short term. Clearly, negative precedents can make institutions more conservative and serve as a wake-up call for regulators.

• In the U.S., a few public pension funds have also attempted to venture into crypto. For example, the Houston Firefighters' Retirement Fund invested $25 million in Bitcoin and Ethereum in October 2021, accounting for about 0.5% of its assets. The fund's management stated that they view cryptocurrencies as a new hedging tool and potential source of growth, not wanting to "ignore" this emerging asset. Due to the small proportion, this investment did not significantly impact the overall portfolio. Similarly, two county-level retirement systems in Fairfax County, Virginia, have gradually allocated small amounts to the blockchain sector since 2018 (about 3-5% of their portfolios), involving various forms such as blockchain venture capital funds and crypto yield farms.

• In contrast, most mainstream pension plans in Europe and Asia have yet to include cryptocurrencies in their qualified investment scope. On one hand, many countries' pension funds tend to focus more on government-led or fixed-income assets, with a lower risk appetite compared to corporate pensions in the U.S. and U.K. On the other hand, regulators in various countries impose strict limits on the investment scope of pension funds, emphasizing "responsible investment" of pension assets, which excludes the crypto market due to issues like money laundering risks, volatility, and uncertainty. However, some private retirement accounts with autonomous investment permissions have begun to explore crypto. For example, in Australia, some high-net-worth individuals have allocated Bitcoin through self-managed super funds (SMSF) as part of a diversified investment. In this model, investment decisions are led by individuals, making it more flexible, but it also poses challenges of insufficient expertise and regulatory blind spots. The U.K.'s self-invested personal pensions (SIPP) have also seen cases of purchasing crypto derivatives, but the U.K. financial regulatory authority has imposed strict restrictions on retail investors buying crypto assets.

It is evident that global pension funds are still in the exploratory stage regarding crypto assets. The U.S. opening 401(k) investments in crypto will undoubtedly attract attention and discussion from regulators and the industry worldwide. If the U.S. practice proves successful, other countries may gradually follow suit and relax policies, allowing pension funds to share in the benefits of the crypto economy. However, in the short term, it is more likely that only a few forward-looking institutions will attempt small-scale trials, with a long way to go before widespread adoption.

# Opportunities and Challenges Brought by 401(k) Funds Entering the Market

Opening the 401(k) pension plan to cryptocurrencies and other alternative assets will significantly enhance the returns and diversification of pension portfolios. Supporters point out that in the past, ordinary workers' 401(k) plans could only invest in public funds, while large institutions and wealthy investors could access high-yield areas like private equity and hedge funds, creating an "unfair" situation. Opening the investment scope of 401(k) plans is expected to allow ordinary investors to "stand on the same starting line as institutions" and share in the appreciation potential of private markets and crypto assets.

For the cryptocurrency market, the entry of 401(k) pensions will not only bring an increase in capital but also symbolize a qualitative change.

• Increase in Capital: Once the policy is implemented, it means that a gap will open in the dam of U.S. retirement savings, allowing some funds to flow into crypto assets. Considering that the 401(k) plan manages nearly $9 trillion in assets, while the current total value of cryptocurrencies is $4 trillion, if 10% of the funds are allocated to the crypto sector, it would equate to nearly $900 billion in potential incremental funds flowing in, which is about 22% of the current total market value of cryptocurrencies, enough to provide significant support for prices. This change in capital dynamics is undoubtedly a major boon for the long-term development of the crypto market.

Source: https://www.tradingview.com/symbols/TOTAL

• Increased Recognition by Institutional Investors: The 401(k) plan is overseen by company trustees and professional advisors, whose asset selections are typically very cautious. Once crypto assets are formally included in mainstream pension options, it will greatly enhance the status of cryptocurrencies like Bitcoin as mainstream investment products, attracting more previously hesitant institutions to follow suit, thereby creating a positive cycle. Fidelity Investments announced back in 2022 that it planned to offer Bitcoin investment options to its 401(k) clients (which was temporarily delayed due to regulatory concerns), and now that policy barriers have been removed, these products are expected to be rapidly brought to market. It can be anticipated that crypto investment tools specifically designed for retirement plans will gradually emerge, such as Bitcoin trust funds for 401(k)s, crypto index funds, and even embedding a small amount of crypto exposure in target date funds.

• Improvement of Investor Structure: Pension funds have long-term stability characteristics, which are expected to improve the investor structure of the crypto market and reduce extreme volatility. Unlike retail investors chasing short-term gains, pension allocations emphasize long-term stable appreciation and risk diversification, and will not frequently enter and exit on a large scale. This means that if a portion of 401(k) assets is allocated to Bitcoin, it will exist as "long-term holders," reducing circulation and enhancing market stability. Of course, this effect will take a considerable amount of time and sufficient scale to manifest, but it has positive significance in direction.

• Promoting the Integration of Traditional Finance and Crypto Finance: As retirement advisors, custodial banks, and fund companies begin to develop crypto products for 401(k)s, the infrastructure of the crypto industry in terms of compliance, custody, and security will also improve. For example, to meet 401(k) requirements, custodians must address issues such as private key custody and theft risks, as well as liquidity arrangements needed for transactions. The entry of traditional financial institutions will accelerate the establishment of unified standards and best practices in the industry, such as valuation models, performance reporting formats, and fee standards. All of these will enhance the friendliness of crypto assets to mainstream capital.

However, the policy opening also faces a series of issues:

• Cost and Liquidity Issues: The trend of 401(k) plans over the past few decades has been to reduce costs, widely adopting low-fee index mutual funds, with average management fees dropping to 0.26%. In contrast, private equity funds typically charge "2% management fees + 20% performance fees," and the fees for crypto investment products are generally higher, requiring very careful design of how to introduce such assets into 401(k) plans.

• Risks and Information Transparency: Traditional public market investments have relatively complete information disclosure and regulation, while private markets and crypto assets suffer from more severe information asymmetry and greater volatility.

• Legal Liability and Litigation Risks: There may be collective lawsuits from employees if there is no clear legal protection, and plan trustees and asset managers may be reluctant to venture into these highly volatile areas.

• Investor Education Challenges: Educating ordinary participants about the risk-return characteristics of assets like Bitcoin, allocation ratios, and their alignment with retirement goals requires ongoing educational guidance; otherwise, there may be issues of blind following and bearing volatility beyond risk tolerance.

For the crypto industry, welcoming traditional pension funds is both a huge opportunity and a significant test. Whether it can provide investment tools that reassure regulators and investors, and whether it can prove its value within a strict fiduciary framework, will determine how far and how fast this long-term capital can go. However, once this door has been slightly opened, it is difficult to close it again. Looking ahead to the next decade, as millennials and Generation Z gradually become the main participants in pensions, their acceptance of digital assets is higher, coupled with technological and regulatory advancements, the proportion of crypto assets in pension portfolios is likely to gradually increase. This will further drive the expansion of the crypto market scale and ecological evolution, and one day, crypto assets may become an indispensable part of retirement wealth allocation, just like gold and real estate.

# Conclusion and Outlook: Is the Tailwind for the Crypto Market Here?

The market widely expects the Federal Reserve to announce its first interest rate cut of the year at the September meeting. According to trading data, the probability of a 25 basis point rate cut in September is nearly 100%, with some betting on a possible 50 basis point cut. The turning point for monetary easing has emerged, and the atmosphere of shifting from "hawkish" to "dovish" is becoming increasingly pronounced. Since this rate cut is seen as the beginning of a long-term trend reversal and the start of a series of policy easings, its medium- to long-term supportive effect on risk assets may become more significant. If the Federal Reserve continues to cut rates and expands its balance sheet to provide liquidity, what the crypto market will welcome is not just "a gust of wind," but possibly a prolonged "period of rain."

The positive news of 401(k) pension plans entering the crypto market coincides with the macro benefits of the Federal Reserve's expected rate cuts, creating a resonant effect in timing. The former brings structural incremental funds and long-term buying power, while the latter creates an overall favorable funding environment and enhances risk appetite. These two forces complement each other and are expected to shape a new upward trend in the crypto market. The potential entry of pension funds means that cryptocurrencies are likely to transition from marginal assets to a part of mainstream asset allocation; while the shift in the interest rate environment provides fertile ground for a new bull market. In the 2025 time window, we may be witnessing a key step towards the maturity of the crypto industry—from speculative products for a few geeks and institutions to becoming part of the pensions of billions of people.

For investors, it is essential to maintain confidence in long-term trends while being vigilant about short-term market volatility and uncertainty. The entry of pension funds is still on the eve of policy implementation, and there may be twists and turns in the process; although the Federal Reserve's policy has shifted to easing, the macroeconomic trajectory still has variables. As the market anticipates, perhaps the spring of crypto has arrived, but we must also learn to sow in the spring and reap in the autumn.

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