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CBS News
6 days ago
- Business
- CBS News
Trump opens the door for crypto and private equity in your 401(k) retirement plan
President Trump on Thursday signed an executive order that could allow millions of Americans saving for retirement through 401(k) accounts invest in higher-risk private equity and cryptocurrency assets. The executive order doesn't immediately change how people will invest for retirement through their employer-sponsored accounts, as federal agencies would need to rewrite regulations to allow expanded investment choices. That's a process that experts say could take months, or longer, to complete. But once done, employers could offer a broader array of mutual funds and investments to workers, according to the White House. New plans could invest in alternative assets, particularly private equity, cryptocurrencies and real estate. The move comes as the 401(k) has become the primary vehicle for American workers to save for retirement, with most employers offering a menu of investment choices among major asset classes, such as stock-based mutual funds. The $5 trillion private equity industry, which makes investments into private businesses rather than publicly traded stocks, has for decades wanted to compete for a role in retirement plans. At the same time, the cryptocurrency industry, whose executives strongly supported Trump's 2024 campaign, has aimed for more mainstream acceptance among Americans. "It was inevitable that bitcoin would make its way into American 401(k)'s," said Cory Klippsten, the CEO of Swan Bitcoin. "As fiduciaries realize bitcoin's risk-adjusted upside over the long term, we'll see growing allocations, especially from younger, tech-savvy workers who want hard money, not melting ice cubes." The EO could give private equity and crypto firms long-sought access to a pool of funds worth trillions. Investment companies applauded Mr. Trump's executive order, with TIAA, which manages the retirement assets of teachers, professors and other academics, and investing giant BlackRock saying they support the measure for providing a broader number of investment strategies to workers. "We believe end investors can benefit from the advantages that private investments can offer when embedded within professionally managed vehicles like target date funds or through guaranteed annuity products," TIAA said in a statement emailed to CBS MoneyWatch. The president's order directs the Labor Department and other agencies to redefine what would be considered a qualified asset under 401(k) retirement rules. Americans' retirement plans are governed by a law known as the Employee Retirement Income Security Act of 1974, better known as ERISA. Employers are required by law to offer retirement options that are in the best interest of their employees, not Wall Street. Most retirement plans for Americans are made up of stock and bond investments, and to a much lesser extent, cash and heavily traded commodities such as gold. Even after the regulations are written, it will take time for the major retirement plan companies such as Fidelity, Vanguard, T. Rowe Price and others, to develop appropriate funds for employers to use. Employers are not likely to revise their retirement plan options quickly as well, so it may take several years before crypto and private equity investments are mainstream in an individual's retirement plan. The price of bitcoin was up 2% on Thursday to $116,542 and has nearly doubled since Trump was elected. Under Democratic President Joe Biden, federal regulators were to treat cryptocurrency investments with "extreme care" because of the extreme volatility of crypto. It is not uncommon for bitcoin, ethereum and other big cryptocurrencies to move up or down 10% in a single day, whereas a 2% or 3% single-day move in the stock market would be considered historic. For cryptocurrency companies, which donated millions to Trump's campaign as well as his inauguration, one goal was to get their industry qualified under ERISA. Coinbase, one of the largest crypto companies in the United States, was also a major donor toward Trump's military parade in Washington this summer. Under Trump, the Securities and Exchange Commission dropped its lawsuit against Coinbase, where the Biden administration said crypto should be treated as a security. Crypto is particularly popular among young Americans. While volatile, bitcoin has generally moved upward since it was created by an anonymous programmer nearly 20 years ago. Private equity firms rely heavily on high-net-worth individuals and state and private pension plans, which have extremely long investment timelines. But having access to Americans' retirement assets would open up a deep pool of cash. Blackstone CEO Steve Schwarzman has told investors going back to at least 2017 that it was a "dream" of his and the industry to be able to draw upon these retirement assets. Previous administrations, Republican and Democrat alike, had agreed that private equity investments, which can be riskier, more expensive and less liquid than traditional stock and bond market mutual funds, should not be included in 401(k) plans.
Yahoo
30-06-2025
- Business
- Yahoo
Crypto could soon help more people get a mortgage — but market experts see 2 risks
The FHFA wants Fannie and Freddie to start counting crypto as an asset when assessing mortgage risk. Some experts aren't on board, citing added risks to housing finance stemming from crypto. Crypto's volatility is a top concern, sources told BI. Cryptocurrency has been slowly making inroads into mainstream finance, and housing could be the next frontier. Last week, the head of the Federal Housing Finance Agency ordered Fannie Mae and Freddie Mac to draw up proposals to begin counting crypto as an asset in mortgage lending assessments. Crypto holdings would be added to the list of traditional assets, such as cash, bank accounts, and stocks, that borrowers can claim when applying for a loan that would fit the mold of those purchased by Fannie and Freddie. Crypto owners would be able to count their holdings toward a mortgage without needing to liquidate them into cash. While some private lenders already consider crypto in mortgage evaluations, the broader mortgage market, including government-backed loans, has yet to follow suit. Cory Klippsten, CEO of the bitcoin financial services company Swan Bitcoin, is excited about the development. Qualifying for a mortgage has been "the number one issue" for bitcoin holders for a long time, in his opinion. He's seen cases of bitcoin holders with portfolios worth eight figures who couldn't qualify for a mortgage. "How do you unlock enough liquidity to put your family in a home? Right now, that causes a lot of forced selling," Klippsten said. However, Klippsten thinks guardrails are important when it comes to new legislation. Others tell BI they think crypto mortgages are a flat-out bad idea. Here's what they say are key issues. Much of the concern about crypto mortgages stems from their volatility. "We see huge intraday swings in the price of cryptocurrencies," Amanda Fischer, policy director and chief operating officer of nonprofit Better Markets, said. "If we are determining someone's creditworthiness based on how much crypto they hold, that estimate may not be true six hours from the time the determination is made." Fischer's also concerned about the safety of crypto assets. While the FHFA proposal states that only cryptocurrencies "evidenced and stored on US-centralized exchanges" can be considered, Fischer points out even centralized exchanges are susceptible to security breaches. For example, Coinbase was just hacked in May. Klippsten believes regulators should limit the list of eligible cryptos to those with over $100 billion in market cap over the last 24 months, excluding more volatile assets like meme coins. "If I were a mortgage lender, I wouldn't underwrite that," Klippsten said of smaller cryptocurrencies, "but I absolutely would underwrite bitcoin." Richard Bernstein, CEO and CIO of Richard Bernstein Advisors, thinks crypto mortgages are a highly risky move that would inject even more volatility into the housing market. Bernstein said that while some may argue bitcoin is a more trusted and established cryptocurrency, many crypto assets tend to move in the same direction at the same time, with a 70% correlation with the top token. "Of course, for a mortgage, the collateral is the real estate itself, so allowing crypto to pass as an underlying credible asset simply compounds the risk of the mortgage," Bernstein said. Another key source of concern about crypto mortgages is the fact that Fannie Mae and Freddie Mac are government-sponsored enterprises, and the mortgage-backed securities they issue have an implicit government guarantee. That means that American taxpayers could ultimately shoulder the burden if riskier lending led to more defaults. This was evident during the 2008 financial crisis, when the government was forced to bail out both GSEs, ultimately taking them over to prevent a wider systemic crisis. "Taxpayers have already lost billions and billions of dollars on Freddie Mac and Fannie Mae. I think they should be on the more conservative side," Fischer said of the GSEs. Counting crypto as mortgage assets could have benefits, such as expanding homeownership to those who may not qualify under traditional asset criteria, but Fischer believes Fannie Mae and Freddie Mac should have more stringent underwriting criteria. "I'm not saying there aren't any pros. Maybe more people can get mortgages who otherwise wouldn't get them," Fischer added. "I just don't think the government should be on the hook for crypto-backed mortgages." Read the original article on Business Insider Sign in to access your portfolio
