By The DOL’s guidance emphasized the fiduciary responsibility of plan advisors to ensure the prudent investment of plan assets under federal labor law. It cautioned against the inclusion of crypto assets due to their speculative and volatile nature, as well as their dubious valuations. The DOL expressed significant concerns about the risks and challenges posed by these investments, including fraud, theft, and loss.
ForUsAll questioned the legal basis for the DOL’s bulletin, arguing that it was effectively restricting the use of crypto assets without following the public notice-and-comment process required for new regulations. The firm claimed that the DOL was attempting to establish a novel standard of care under the Employee Income Retirement Security Act, solely applicable to crypto investments.
The DOL’s victory reinforces its position in warning against direct investments in cryptocurrencies in retirement plans and highlights the importance of prudent investment decisions to protect participants’ retirement accounts.
It is clear that the DOL considers risk management and investor protection paramount when it comes to crypto assets in the context of retirement planning. As the cryptocurrency market continues to evolve, it remains to be seen how regulators will further address the potential risks associated with these assets in retirement plans.
DOL Crypto Bulletin Challenged in Court
The recent bulletin issued by the Department of Labor (DOL) regarding cryptocurrency regulation faces resistance from financial firm ForUsAll. The DOL released the bulletin following President Biden’s executive order, which emphasized the need for coordinated efforts to regulate the crypto space.
ForUsAll claims that the DOL’s warning has had a negative impact on its business. Around one-third of the retirement plans that ForUsAll had been discussing crypto offerings with reportedly pulled out as a result of the DOL’s action.
However, Judge Christopher Cooper of the U.S. District Court for the District of Columbia rejected ForUsAll’s request to vacate the crypto bulletin. While acknowledging the harm caused to ForUsAll, the judge found no evidence to suggest that the retraction by third-party fiduciaries would be reversed or result in the intended partnerships being formed.
Regarding the procedural argument, Judge Cooper stated that the DOL’s issuance of a compliance assistance release is not subject to judicial review, unlike formal rules issued by departments or agencies. According to the Administrative Procedure Act, only “final agency actions” are reviewable by a court. These actions must represent the agency’s decision-making process and establish new rights, obligations, or legal consequences – criteria which the DOL’s compliance bulletin does not meet.
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