Key Insights: Accelerating the maturity of the crypto market, establishing government-level endorsement, opening the possibility for massive capital inflows, and creating a new strategic crypto accumulation pool.

On August 7, 2025, U.S. President Donald Trump signed an executive order permitting 401(k) plans to invest in a broader array of assets, including private equity, real estate, and, for the first time, crypto assets.

This policy is straightforward and easy to interpret.

• It provides a nationwide endorsement for the crypto market, signaling a drive toward market maturity.
• Pension funds gain more diversified investment opportunities and potential returns, though this introduction also increases volatility and risk.

In the context of crypto, this development is significant.

If we look at the evolution of the 401(k) plan, a critical inflection point occurred during the Great Depression, when pension reforms allowed investments in equities. Although the historical and economic environments differ, the current trend of adding crypto assets closely mirrors those earlier shifts.

1/6 · Pension Systems Before the Great Depression

In the early 20th century through the 1920s, U.S. pensions were primarily structured as Defined Benefit Plans, where employers committed to providing retired employees with a stable monthly pension. This approach originated in the late 19th-century wave of industrialization and was designed to attract and retain workers.

During this period, pension fund investment strategies were highly conservative. The prevailing view was that pension assets should emphasize security over high returns, and regulations like the Legal List limited investments to low-risk assets such as government bonds, high-grade corporate bonds, and municipal bonds.

This conservative approach performed well during economic expansions, but also capped potential returns.

2/6 · The Impact of the Great Depression and Pension Crisis

The Wall Street Crash of October 1929 signaled the start of the Great Depression: the Dow Jones dropped nearly 90% from its peak, causing a global economic collapse. Unemployment soared to 25%, and countless companies failed.

Although pension funds had little exposure to equities, the crisis indirectly impacted them. Many sponsoring employers went bankrupt and could not fulfill their pension promises, resulting in suspended or reduced pension payments.

This sparked public concern over employers’ and the government’s pension management abilities, prompting federal intervention. In 1935, the Social Security Act established a national pension system, though public and private pension plans remained primarily under local control.

At the time, regulators stressed that pensions should avoid speculative assets like equities.

…

The turning point: After the crisis, economic recovery was sluggish, and bond yields dropped (in part due to higher federal taxes), initiating change. Insufficient yields to meet promised payouts became increasingly apparent as a structural problem.

3/6 · Post-Depression Shifts in Investment and Controversy

After the Great Depression—particularly during and after World War II (1940s–1950s)—pension investment strategies gradually shifted from conservative bond holdings to include equities. This was a contentious process fueled by significant opposition.

Despite economic recovery in the postwar era, the municipal bond market stagnated, and yields fell to just 1.2%, making it impossible to meet required pension returns. Public pension funds faced funding shortfalls, putting greater pressure on taxpayers.

In parallel, private trusts began to apply the Prudent Man Rule, derived from 19th-century trust law but reinterpreted during the 1940s to allow diversified, higher-yield investments provided overall prudence. This rule first applied to private trusts, but gradually influenced public pension funds.

In 1950, New York became the first state to partially implement the Prudent Man Rule, permitting up to 35% of pension assets to be allocated to equities. This marked a key shift from fixed legal lists to more flexible investment. Other states followed suit: North Carolina, for example, approved corporate bond investments in 1957 and allowed stock allocations of 10% in 1961, rising to 15% by 1964.

This change was controversial. Opponents, mainly actuaries and labor unions, argued that investing in equities could repeat the disasters of 1929 and put retirement assets at risk. The media and politicians described this as risking workers’ retirement funds in the market, warning of potential pension fund collapse during downturns.

To ease these concerns, equity allocations were strictly capped (initially at 10–20%) and concentrated in blue-chip stocks. Over time, the benefit of equity exposure became apparent as markets rallied through the postwar bull run, and the controversy faded.

4/6 · Further Evolution and Institutionalization

By 1960, more than 40% of public pension assets were invested outside government securities. The percentage of New York public pension assets in municipal bonds dropped from 32.3% in 1955 to just 1.7% by 1966. This reduced the burden on taxpayers—but increased pension fund exposure to market risk.

The Employee Retirement Income Security Act of 1974 (ERISA) extended the prudent investor standard to public pensions. While initially controversial, equity investing eventually gained acceptance, though market shocks such as the 2008 financial crisis rekindled similar debates.

5/6 · Market Signals

The move to allow crypto in 401(k) plans mirrors the earlier debate over equities: both reflect a shift from conservative to higher-risk assets. It’s clear that crypto is even less mature and more volatile than equities were then, making this a bold step in pension reform. There are several important signals here,

The promotion, regulation, and education around crypto assets will all intensify, which will help raise public awareness of this new asset class and its unique risks.

From a market standpoint, the inclusion of equities in pension plans supported the prolonged bull run in U.S. stocks. For crypto assets to achieve a similar trajectory, they must also show a consistent upward trend. Furthermore, because 401(k) funds are essentially locked in,

pension fund crypto purchases represent a form of crypto asset accumulation—creating yet another strategic reserve of crypto assets.

From any perspective, this is a significant benefit for crypto.

The following is supplemental material. Professionals may skip this section.

6/6 · Appendix: What Is a 401(k) and How Does It Work?

The 401(k) is an employer-sponsored retirement savings plan established under Section 401(k) of the U.S. Internal Revenue Code, first introduced in 1978. It allows employees to contribute a portion of their pre-tax (or, depending on the plan, post-tax) wages to individual retirement savings accounts for long-term saving and investment.

A 401(k) is a defined contribution plan, unlike the traditional defined benefit plan. The core difference is that both employees and employers contribute, and returns or losses are borne solely by the employee.

6.1 Contributions

Employees can elect to defer a portion of each paycheck as 401(k) contributions, which are deposited to their individual retirement accounts. Employers may provide matching contributions, which is subject to company policy and is not mandatory.

6.2 Investment

The 401(k) is not a pooled fund, but rather an individual account controlled by the employee. Employees can invest funds in options that the employer has preselected. Common choices include S&P 500 index funds, bond funds, and balanced funds. Under the 2025 executive order, private equity, real estate, and crypto assets are now permitted.

Employees must select their own investment portfolio from these options or accept the plan’s default. Employers offer the options but are not responsible for employee investment decisions.

• Returns: All investment gains belong entirely to the employee, with no requirement to share with the employer or anyone else.
• Risk: When the market declines, the employee bears all losses; there are no guarantees.

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