From Cointelegraph · By Jona Jaupi
Smaller cryptocurrencies could become available in US 401(k) retirement plans under a proposed Labor Department rule, but experts say they may face more challenges than Bitcoin (BTC) and Ether (ETH).
The rule reached the White House for final review on Thursday, according to the Office of Information and Regulatory Affairs. It aims to make it easier for retirement plans to offer alternative investments like crypto, while offering more legal protection for employers and plan managers.
The Labor Department’s March proposal neither specifies which digital assets could be included nor sets a minimum market capitalization requirement. However, it does guide retirement plan managers to consider six factors when choosing: performance, fees, liquidity, valuation, benchmarks and complexity.
The proposal could open the door to more cryptocurrencies in retirement plans, however, it does not guarantee they will be offered. And when it comes to smaller tokens, experts say they could face challenges because of their limited history, liquidity and other risks.
Why smaller cryptocurrencies could face challenges
Teresa Goody Guillén, managing partner at Bellementis PLLC, said Bitcoin and Ether are likely to be the first cryptocurrencies offered because of their established markets and investment products. Bitcoin and Ether are the two largest cryptocurrencies by market capitalization, at approximately $1.5 trillion and $273 billion, respectively, according to CoinGecko data as of 20:01 UTC on Nov. 6.
Still, that doesn’t automatically exclude altcoins, she said. Instead, those managing 401(k) plans would need to show that their investment choices are sensible.
“The real question isn’t which cryptocurrencies regulators pick – it’s whether an investment meets the same standards of prudence, liquidity, valuation and investor protection as any other retirement option,” Guillén said.
She added that while a digital asset’s market cap matters, it shouldn’t be the deciding factor. “Big doesn’t mean suitable, and small doesn’t mean disqualified,” Guillén said. “Digital assets shouldn’t get special treatment, or be excluded because they use different technology.”
Bernardo Brites, co-founder and CEO of Trace Finance, echoed Guillén sentiment, adding: “Run any token through that list and the answer is short. Bitcoin passes clearly. Ether passes; everything else fails on track record or benchmark before a fiduciary ever gets to market cap.”
Brites explained, in this situation, market cap matters only indirectly. “The practical test is simpler: can a plan committee document a daily, reliable price from a regulated wrapper?” he said. “If not, it is not going in.”
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