Yellen doubts cryptocurrency's place in 401(k) plan, says it should be regulated by Congress

U.S. Treasury Secretary Janet Yellen has weighed in on discussions to include cryptocurrencies in retirement plans, saying cryptocurrencies are a very risky investment that should be regulated by Congress.

At an event organized by The New York Times in Washington on June 9, Yellen shared her thoughts on Fidelity Investments' groundbreaking attempt to include cryptocurrencies in retirement plans:

"It's not something I'd recommend to most people saving money for retirement. To me, it's a hugely risky investment."

The U.S. Department of Labor (DOL), along with Senators Elizabeth Warren, Tommy Tuberville and Cynthia Lummis, have weighed in on discussions surrounding digital currencies in 401(k) plans.

Yellen even suggested that Congress could regulate the types of assets that can be included in retirement plans:

"I'm not saying I'm advising it, but it seems to me it's a reasonable thing to do."

401(k) investments are governed by the Employee Retirement Income Security Act of 1974. It doesn't specify which asset classes can or cannot be included in a 401(k) plan, but requires trustees to "demonstrate the care, skill, prudence and diligence of a prudent person."

In April, Fidelity announced that it would allow 401(k) retirement savings account holders to invest directly in Bitcoin. The Labor Department responded with a compliance report threatening legal action, while Sens. Elizabeth Warren of Massachusetts and Tina Smith of Minnesota demanded answers from the company on how they planned to address the risks listed by the DOL.

Meanwhile, Senator Tommy Tuberville of Alabama unveiled a “Financial Freedom Act” that would allow investors to add cryptocurrencies to their 401(k) retirement savings plans, while Senator Cynthia Lummis of Wyoming Says she will legalize adding cryptocurrencies to 401(k)s as part of her long-awaited crypto bill.