DOL makes no secret of its concerns about crypto
March 11, 2022
DOL makes no secret of its concerns about cryptoMarch 11, 2022 The U.S. Department of Labor (DOL) issued Compliance Assistance Release No. 2022-01 on March 10, 2022, cautioning 401(k) plan fiduciaries to “exercise extreme care” before they allow participant investments in cryptocurrency or crypto-related products. This guidance comes a day after President Biden’s executive order, directing federal agencies to coordinate efforts to study the risks and benefits of cryptocurrency and consider new regulations. In the compliance assistance release, DOL said that, “at this early stage in the history of cryptocurrencies, [DOL] has serious concerns about the prudence of a fiduciary's decision to expose a 401(k) plan's participants to direct investments in cryptocurrencies, or other products whose value is tied to cryptocurrencies.” Cryptocurrency presents “significant risks and challenges to participants’ retirement accounts, including significant risks of fraud, theft and loss”, DOL wrote, in addition to the following highlighted reasons:
Perhaps more troubling, DOL said that “[t]he plan fiduciaries responsible for overseeing such investment options or allowing such investments through brokerage windows should expect to be questioned about how they can square their actions with their duties of prudence and loyalty in light of the risks described above.” (emphasis added) Plan fiduciaries of 401(k) plans with brokerage windows that include cryptocurrency—or more likely a product that invests in crypto futures, such as a mutual fund or exchange traded fund—should evaluate whether they should continue to offer these types of investments, at least on a prospective basis.
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Adam B. Cohen Partner Washington, DC, United States Carol T. McClarnon Partner Washington, DC, United States W. Mark Smith Of Counsel Washington, DC, United States Michael A. Hepburn Partner Washington, DC, United States Paul R. Lang Of Counsel Washington, DC, United States Brenna M. Clark Partner Atlanta, United States Brittany Edwards-Franklin Counsel Atlanta, United States Laura Taylor Partner Washington, DC, United States Deepa S. Menon Counsel Washington, DC, United States Bonnie R. Burke Senior Attorney Atlanta, United States Caitlin G. Naylor Senior Associate Atlanta, United States Catherine F. Beaver Associate Washington, DC, United States Latest Insights
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