US and UK Advance Crypto Regulations for Retirement and Custody

Two of the world’s leading financial regulators took significant steps this week toward formalizing the role of cryptocurrencies in traditional finance. In the United States, the Labor Department officially reversed its 2022 guidance discouraging crypto assets in 401(k) retirement plans, restoring fiduciary discretion for plan managers. 

Meanwhile, in the United Kingdom, the Financial Conduct Authority (FCA) opened a public consultation on proposed rules for stablecoins and crypto custody, aiming to support innovation while reinforcing market trust and consumer protection.

US Labor Department Rescinds Biden-Era Crypto Retirement Investment Limits in Major Shift

The US Department of Labor has formally rescinded a 2022 guidance that discouraged the inclusion of cryptocurrencies in 401(k) retirement plans, signaling a major pivot in federal retirement investment policy and reflecting a broader pro-crypto shift under the Trump administration.

The announcement, made on May 28, revokes a controversial compliance bulletin that had urged fiduciaries to “exercise extreme care” when considering digital assets for retirement offerings. At the time, the Biden-era agency cited volatility, valuation uncertainty, and security risks as key reasons for opposing crypto exposure in employer-sponsored plans.

But the current Labor Department, under Secretary Lori Chavez-DeRemer, has now reversed that stance, calling the 2022 guidance an “overreach” and a break from the agency’s historically neutral approach to fiduciary responsibilities.

The move is being framed as a return to a “principled-based” framework, in which plan managers, rather than federal regulators, assess whether digital assets are suitable for long-term retirement strategies. Chavez-DeRemer emphasized that fiduciaries are in the best position to weigh the merits and risks of cryptocurrencies based on the unique needs of plan participants, as opposed to receiving top-down prohibitive mandates from Washington.

This change effectively grants retirement plan providers more discretion to include Bitcoin, Ethereum, and other digital assets in 401(k) offerings, potentially opening the door to broader mainstream adoption among long-term savers.

The American Banking Association (ABA), which had previously criticized the 2022 guidance for being issued without public review or comment, applauded the rollback. The ABA argued that the prior administration’s action amounted to de facto rulemaking without transparency or due process.

Backstory: A Cautious Past

The original guidance issued in March 2022 by the Employee Benefits Security Administration (EBSA) was widely viewed as a chilling message to retirement providers. The memo warned that cryptocurrencies were speculative, volatile, and susceptible to fraud, and that offering them in 401(k) plans could place fiduciaries at legal risk under the Employee Retirement Income Security Act (ERISA).

It also coincided with high-profile crypto market collapses, including the TerraUSD meltdown and the eventual implosion of FTX, which reinforced skepticism among regulators and the public. Several asset managers, including Fidelity Investments, pushed back against the guidance at the time, insisting that digital assets offered a valid diversification strategy, particularly for younger investors.

Fidelity, one of the few major financial institutions to defy the Biden-era resistance, launched its Digital Assets Account (DAA) for 401(k)s in 2022, allowing plan sponsors to offer Bitcoin exposure to their employees. The investment giant structured the product with robust compliance measures and minimal fees, arguing that retirement savers deserved optional access to emerging asset classes.

Fidelity’s pioneering effort sparked debate about whether mainstream investors should have crypto exposure in their retirement portfolios—debate that is likely to intensify in the wake of the Labor Department’s new stance.

Broader Crypto Policy Under Trump

The Labor Department's reversal is part of a larger trend under President Donald Trump’s current administration, which has adopted a decisively pro-crypto posture. Trump has pledged to make the US “the world capital of crypto,” and federal agencies have taken steps to dial back regulatory crackdowns on high-profile crypto platforms like Coinbase, Kraken, and Uniswap.

Simultaneously, the administration has launched exploratory frameworks for tokenizing real-world assets (RWAs), such as bonds and commodities, and for defining clearer rules around digital asset classifications—efforts praised by many in the blockchain industry.

Despite these advances, some lawmakers remain wary of the Trump administration’s close alignment with the crypto industry, citing the need for guardrails to prevent systemic risks and ensure retail investor protection. Critics have also called for more transparency regarding Trump's own business interests in the sector.

The Labor Department's updated position does not constitute a blanket endorsement of cryptocurrencies in 401(k) plans. Rather, it shifts the responsibility and liability back to fiduciaries, who must still uphold their duty to act in the best interests of plan participants. Industry analysts expect many asset managers to proceed cautiously, balancing client demand with evolving legal and regulatory standards.

Nevertheless, the reversal may pave the way for a surge in crypto retirement product development, including new portfolio options, managed funds, and potentially tokenized pension models in the coming years.

UK’s FCA Unveils Draft Rules for Stablecoins and Crypto Custody, Opens Door to Public Feedback

Meanwhile, the United Kingdom has taken another critical step toward formalizing its cryptocurrency regulatory framework. On May 28, the Financial Conduct Authority (FCA) published a consultation paper requesting public feedback on proposed regulations for stablecoins and crypto custody services. 

The initiative marks what the FCA described as a “milestone on the road to crypto regulation” as the UK pushes forward with plans to become a global leader in responsible digital asset innovation.

The proposals aim to provide a robust and secure environment for crypto users and investors, while preserving the flexibility necessary for continued technological growth in the fintech space. The consultation will remain open in the coming weeks, inviting perspectives from both industry stakeholders and the general public.

David Geale, Executive Director of Payments and Digital Finance at the FCA, emphasized the regulator’s dual commitment to innovation and integrity.

“At the FCA, we have long supported innovation that benefits consumers and markets,” Geale said. “At present, crypto is largely unregulated in the UK. We want to strike a balance in support of a sector that enables innovation and is underpinned by market integrity and trust.”

The new proposals reflect extensive input from roundtable discussions, industry consultations, and the broader global movement toward regulated digital assets. The FCA acknowledged that while crypto has become increasingly integrated into the UK’s financial ecosystem, the lack of clear rules has left investors vulnerable and market participants operating in a legal grey area.

One of the FCA’s core objectives is to ensure that regulated stablecoins maintain their promised peg to a fiat currency, such as the British pound or US dollar. Under the proposed rules, issuers of qualifying stablecoins would be legally obligated to honor 1:1 redemption rights at par value, regardless of the fluctuating value of backing asset portfolios.

“We propose to require issuers to provide holders with the right to redeem qualifying stablecoins at par value with the reference currency,” the FCA wrote, “with a payment order placed to an account in the name of the holder at the latest by the end of the business day following receipt of a valid request.”

To reinforce consumer protections, stablecoin issuers would be required to appoint independent, third-party custodians to safeguard their reserve assets. Issuers must also disclose clear and accessible information about the structure and quality of the asset backing.

This push for transparency comes amid growing global scrutiny over stablecoin reserve practices, especially after the collapse of poorly backed stablecoins like TerraUSD in 2022 triggered industry-wide contagion.

Coordination with the Bank of England

The FCA is working in tandem with the Bank of England (BoE) to construct a comprehensive framework for stablecoins, especially those that could operate at systemic scale. Sarah Breeden, Deputy Governor for Financial Stability at the BoE, confirmed that the central bank will release a complementary consultation paper later this year.

In a separate discussion paper, the FCA introduced sweeping new requirements for firms providing crypto custody services. These proposals are designed to bolster investor confidence by ensuring that crypto assets are held securely and remain readily accessible at all times.

Custodians will be expected to follow strict internal controls, implement high-security measures, and maintain transparent procedures for asset segregation, incident reporting, and recovery mechanisms.

The proposed rules also seek to reduce both the likelihood and impact of institutional failure, in direct response to previous collapses such as Celsius, BlockFi, and FTX, where customers faced prolonged access delays or complete loss of assets.