Written by: Hao Yicheng
Summary: The restructuring of a 12 trillion USD market.
“However, we must remain soberly aware that this is merely the opening of a door; capital will not flow in overnight. In the short term, its effect on boosting market sentiment outweighs the actual capital inflow. In the long run, its true value lies in the regulatory signal it sends: crypto assets are being considered within the most important wealth management systems in the United States.”
On August 7, 2025, U.S. President Donald Trump signed an executive order titled “Democratizing Access to Alternative Assets for 401(k) Investors,” aiming to allow all Americans participating in employer retirement plans to enjoy alternative asset investment opportunities similar to those of institutional investors, including private equity, real estate, commodities, infrastructure projects, and digital assets (cryptocurrencies). This move involves retirement funds as large as 12.5 trillion USD and could have far-reaching impacts on the crypto, private equity, and real estate markets.
I. What is a 401(k)?
The 401(k) is a type of corporate retirement savings plan in the United States, named after Section 401(k) of the U.S. Internal Revenue Code. Its core mechanism is: provided by employers, employees participate voluntarily, and tax incentives encourage retirement savings.
1. Basic Mechanism
l Employer Provided: Companies set up 401(k) accounts for employees.
l Voluntary Employee Contributions: A certain percentage (e.g., 5%) is deducted from wages and deposited into the account.
l Tax Incentives:
§ Traditional 401(k): Contributions are pre-tax; withdrawals at retirement are taxed.
§ Roth 401(k): Contributions are post-tax; withdrawals at retirement are tax-free.
l Employer Match: Many companies subsidize employee contributions at a certain rate (for example, if an employee contributes 5%, the company matches 3%), which is one of the plan’s core attractions.
2. Investment Methods
l Self-Directed Choices: The account holder independently decides how to invest the funds within the 401(k) account from a list of options provided by the plan (usually including various funds, ETFs, bonds, etc.).
l Tax-Deferred Growth: Investment gains are not taxed before retirement, allowing for compound growth.
3. Withdrawal Restrictions
l Typically, withdrawals are only allowed freely after age 59.5. Early withdrawals are subject to taxes and may incur a 10% penalty.
4. Scale and Importance
l As of 2024, the total asset size of U.S. 401(k) plans is between 8 and 12 trillion USD, making it the most important retirement savings tool for Americans. Its enormous capital size means that even minor changes in investment policy can trigger significant market waves.
II. Core Content of the Executive Order
1. Policy Objectives
l To “unlock” alternative asset investment opportunities for ordinary Americans, narrowing the gap in investment channels and potential returns between them and institutional investors.
l Encourage employers and plan providers to include more diversified investment options in 401(k) plans.
2. Types of Assets Involved
l Private equity and private credit
l Real estate and infrastructure
l Commodities
l Actively managed digital asset investment tools (such as crypto funds, crypto ETFs, etc.)
3. Regulatory Arrangements
l Requires the Department of Labor (DOL) to provide “Safe Harbor” guidance for plan sponsors (employers) under the Employee Retirement Income Security Act (ERISA) framework, clarifying the scope of their fiduciary responsibilities to reduce litigation risks arising from offering alternative asset options.
l Requires the U.S. Securities and Exchange Commission (SEC), Treasury Department, and other agencies to assess and adjust the “qualified investor” threshold, opening compliant investment channels for ordinary retirement account investors.
l Encourages the market to develop investment products suitable for retirement accounts, such as target date funds, collective investment trusts (CITs), etc., to balance the risks and liquidity of alternative assets.
III. Impact on Cryptocurrencies
Analyzed from three dimensions: capital, compliance, and market sentiment:
1. Capital: Unlocking the Imagination of Long-term Funds, but Inflows Will Be Slow
l Theoretical Capital Pool: The total size of U.S. 401(k) and other defined contribution retirement plans is about 12.5 trillion USD. In theory, even if only 1% of assets are allocated to the crypto sector, it could bring up to 125 billion USD in incremental funds.
l Inflows Depend on Multiple Choices: It must be made clear that funds will not flow in automatically. The actual scale depends on whether employers are willing to provide, whether plan managers launch products, and whether employees actively choose to allocate. This is a long process of multi-party games.
l Long-term Holding Attribute: 401(k) funds are extremely long-term and stable. Funds entering the crypto market are likely to become “patient capital,” helping to reduce overall market selling pressure and volatility.
l Landmark Event: BlackRock has announced plans to launch the first batch of crypto-related investment products for 401(k) in 2026, which could become a catalyst for the large-scale entry of crypto assets into U.S. retirement accounts for the first time.
2. Compliance: Obtaining an Institutional “Entry Ticket”
l The executive order mentions “digital assets” positively in federal-level long-term retirement investment policy for the first time, providing strong institutional endorsement for cryptocurrencies as a legitimate, allocatable asset class.
l This move will greatly promote the compliance process of crypto asset-related financial products and clear the way for the SEC to approve more crypto ETFs or funds in the future.
3. Market Sentiment: Short-term Boost and Long-term Confidence Foundation
l In the short term, this news will be an important catalyst for market sentiment, possibly triggering a round of speculation around “compliance” and “institutional capital entry.”
l In the long run, institutional acceptance will help enhance overall market trust, attract more traditional investors’ attention and participation, and promote the improvement of related infrastructure.
IV. Opportunities and Challenges
1. Opportunities
· Huge Potential Capital Inflows: May reshape the capital structure of crypto assets, introducing more long-term, stable “patient capital.”
· Promoting Deep Integration with Traditional Finance: Marks a key step for crypto assets from “alternative investment” to “mainstream asset allocation.”
· Spurring Compliance Product Innovation: Creates vast market opportunities for asset management companies, custodians, and fintech firms.
2. Challenges
· Complexity of Regulation and Law: The legal effect of the executive order is limited and easily overturned, mainly serving as guidance. True institutionalization requires Congress to amend fundamental laws such as ERISA. Until then, policy uncertainty remains.
· Strong Resistance from Fiduciary Responsibility: Employers, as fiduciaries of 401(k) plans, are extremely sensitive to introducing high-volatility assets. To avoid legal litigation and management costs, they will be the “final gatekeepers” for crypto options entering 401(k), and their acceptance process may be very slow.
· Investor Behavioral Inertia and Education Gap: Most 401(k) participants are not professional investors, tend to choose default low-risk portfolios (such as target date funds), and rarely make changes. Getting them to actively choose high-risk crypto assets requires large-scale and effective investor education.
· Limitations of the Products Themselves: Crypto assets generally have high volatility, complex valuation, and relatively high transaction costs. How to design products that both reflect market returns and meet retirement accounts’ requirements for risk control and low cost is a core challenge for asset management companies.
V. Conclusion
From New Hampshire and Texas promoting Bitcoin reserve bills to this federal-level executive order, the United States is gradually paving the way for crypto assets to integrate into the mainstream financial system. The executive order signed by Trump is undoubtedly a milestone event for the institutionalization and mainstreaming of cryptocurrencies.
However, we must remain soberly aware that this is merely the opening of a door; capital will not flow in overnight. In the short term, its effect on boosting market sentiment outweighs the actual capital inflow. In the long run, its true value lies in the regulatory signal it sends: crypto assets are being considered within the most important wealth management systems in the United States.
In the future, the actual scale of capital inflows will depend on the implementation of regulatory details, the richness of compliant products, employers’ willingness to accept, and ultimately the independent choices of every ordinary investor. The road ahead is still long, but the direction has never been clearer.
