Elizabeth Warren and Bernie Sanders are sounding the alarm on the “financial harm” they say could be unleashed on millions of Americans if the retirement industry heeds President Donald Trump’s recommendations and exposes 401(k) plans to riskier assets, including crypto.
In a letter sent to SEC chair Paul Atkins and Labor Secretary Lori Chavez-DeRemer this week, the progressive senators warned that recent moves by the Trump administration to encourage 401(k) providers to invest Americans’ retirement savings in crypto and private markets could have devastating consequences.
The letter underscored not just President Trump’s recent executive order encouraging the retirement savings industry to embrace crypto, but also the Department of Labor’s rescinding of Biden-era policies advising 401(k) caution when mulling exposure to higher-risk assets like private market funds and crypto-exposed stocks and ETPs.
Senators Ron Wyden (D-OR), Dick Durbin (D-IL), Jeff Merkley (D-OR), Chris Murphy (D-CT), and Tina Smith (D-MN) also signed the letter.
“[The Department of Labor] is currently working to legitimize these financial products as safe investments to save for retirement,” the senators wrote. “This reversal is troubling as American workers rely on their retirement savings to live in dignity and self-reliance as they age; thus, added protections are rightfully applied to retirement savings plans.”
The letter highlighted concerns raised by prior government studies about how crypto investments differ from other forms of investment typically relied on by retirement accounts to generate sturdy savings.
One such study by the Government Accountability Office (GAO) found that because crypto tokens do not produce any cash flow, they do not generate returns for investors, and thus can only generate profit when sold back for a higher price. It’s a dynamic the office said made future crypto prices near-impossible to predict, and appeared “much more like gambling than a productive investment.”
The letter also noted President Trump’s direct exposure to crypto, and the likelihood that a massive investment into crypto by the $31 trillion retirement savings industry could directly benefit him and his family. Indeed, analysts have predicted that should 401(k) providers embrace crypto as the president has asked them to, the development could send billions upon billions of dollars into the digital asset sector in a matter of years.
“How can the American people trust the advice they get from an administration that stands to potentially further profit by this move?” the senators said.
The group of Senate Democrats has asked the heads of the SEC and Labor Department to provide them with information in the coming weeks regarding its considerations of the risks posed by its new, “dangerous” retirement savings policies.
The senators asked, among other things, whether the Labor Department intends to weaken existing rules about the due diligence required of fiduciaries; whether the department has studied the risks posed to retail investors should their savings be invested in crypto and private markets; and whether it has conducted any investigation into how much the Trump family stands to profit from these new policies.
