Bitcoin ETF 401k: The Great Awakening - How Your Boring Retirement Account Became a Bitcoin Gateway

Executive Order 14330 opened 401(k) plans to Bitcoin ETFs in August 2025—here's what taxpayers need to understand about access, reporting, and compliance.

December 28, 2025

Important Notice

This article is strictly educational. It describes regulatory changes, tax reporting requirements, and structural considerations related to Bitcoin ETFs in retirement accounts. Nothing in this article constitutes investment advice, a recommendation to buy or sell any security, or guidance on portfolio allocation. Monaco CPA is an accounting firm providing tax compliance services—we do not provide investment advice.

The Structural Shift in Retirement Investing

The 401(k) your parents used to purchase index funds has undergone a structural transformation. In 2025, regulatory changes opened access to Bitcoin ETFs within many employer-sponsored retirement plans.

This shift raises important tax, compliance, and risk questions that retirement savers should understand before evaluating whether such investments fit their individual circumstances.

Part I: The Regulatory Changes of 2025

On August 7, 2025, President Trump signed Executive Order 14330, titled "Democratizing Access to Alternative Assets for 401(k) Investors."

The Order declared it the official policy of the United States that "every American preparing for retirement should have access to funds that include investments in alternative assets"—explicitly naming cryptocurrencies alongside private equity and real estate.

This was a directive binding federal agencies to a new operational standard, with a 180-day deadline for compliance.

For decades, regulators used "merit regulation"—limiting assets they deemed too risky for ordinary Americans. EO 14330 shifted toward "disclosure and access," returning choice to individuals with fiduciary protection.

The DOL's Guidance Rescission

Before August 2025, the governing guidance was the Department of Labor's Compliance Assistance Release No. 2022-01—known in the industry as the "Frown Letter." This guidance warned fiduciaries to exercise "extreme care" with crypto.

On August 12, 2025, the DOL formally rescinded that guidance, moving toward a "neutral, principle-based approach."

Critical point: This rescission did not eliminate fiduciary obligations. Plan sponsors and fiduciaries retain responsibility under ERISA to act prudently and document their decision-making. The regulatory environment shifted, but fiduciary duty remains.

Pending Legislation

The "BITCOIN Act of 2025" (S.954), introduced in March 2025, proposes changes that could affect how retirement plans handle cryptocurrency distributions. This legislation remains pending, and its final form is uncertain.

Part II: Current Market Context

Understanding current market conditions provides context for the asset class under discussion.

December 2025 Data Points

Metric	Value
Bitcoin Price (Dec 28, 2025)	~$87,300
All-Time High (October 6, 2025)	$126,273
Decline from ATH	-30.9%
December ETF Outflows	$4+ billion

This data illustrates a core characteristic of cryptocurrency: significant price volatility. Since early October 2025, Bitcoin declined over 30%. On December 24th alone, Bitcoin ETFs saw outflows exceeding $188 million.

Market Cycle Perspectives

Institutional research from firms like VanEck and 21Shares has examined whether historical Bitcoin price patterns remain predictive. With annual issuance now below 1% and ETF-driven demand becoming the dominant market factor, some analysts suggest the market has structurally changed.

These are observations about market dynamics, not predictions of future performance.

Correlation Behavior

During December 2025, when market uncertainty increased, capital flows favored gold over Bitcoin. This observed behavior is relevant context for understanding how different market participants currently categorize digital assets.

Part III: Fiduciary Standards and Plan Sponsor Obligations

This section is essential for plan sponsors, HR professionals, and fiduciaries.

EO 14330 opened access, but ERISA fiduciary obligations remain in force.

Documentation Requirements

Plan sponsors offering Bitcoin ETF access—whether through the core menu or Self-Directed Brokerage Accounts—should document:

• Educational materials provided to participants

• Risk disclosures specific to digital asset characteristics

• Rationale for offering or permitting access

• Monitoring procedures

The SDBA Question

Offering access through a Self-Directed Brokerage Account (SDBA) may affect plan-level responsibility, but courts have not fully defined the duty-of-prudence boundary within brokerage windows. Plan sponsors should not assume that SDBA access eliminates fiduciary considerations.

Expected Regulatory Development

New DOL guidance—potentially including "safe harbor" provisions—is expected in Q1 2026. Until then, fiduciaries operate under general ERISA prudence standards.

Part IV: Understanding Self-Directed Brokerage Windows

For most participants, Bitcoin ETF access—if available—comes through Self-Directed Brokerage Accounts rather than the core investment menu.

Industry Statistics

• Approximately 30% of 401(k) plans offer an SDBA

• Approximately 55% of large plans (>$200M assets) have one

• Only 1-3% of eligible participants typically utilize them

• Average SDBA balance: $362,000 (Q2 2025)

Platform Variations

Fidelity (BrokerageLink)

• Permits purchase of certain crypto ETFs inside BrokerageLink

• Some plans offer a Digital Assets Account for direct Bitcoin holding (requires employer opt-in)

• Uses in-house custody through Fidelity Digital Assets

Schwab (PCRA)

• Does not permit direct cryptocurrency purchases

• Does permit purchase of registered ETF securities

• Schwab documentation states: "Participants are unable to purchase cryptocurrency in their PCRA"

Common Misunderstandings

Participants often incorrectly assume:

• SDBA access means unlimited investment options (plan restrictions vary)

• All crypto products are available (many plans permit only regulated ETFs)

• SDBA transactions have no costs (commissions and fees may apply)

Part V: ETF Structural Information

All spot Bitcoin ETFs hold the same underlying asset and track Bitcoin's price. The structural differences relate primarily to fees and custody arrangements.

Fee Structures (December 2025)

Ticker	Fund	Expense Ratio	Fee Status	Custodian
IBIT	iShares Bitcoin Trust	0.25%	Standard	Coinbase Prime
FBTC	Fidelity Wise Origin	0.25%	Standard	Fidelity Digital Assets
ARKB	ARK 21Shares Bitcoin	0.21%	Waiver through Oct 2026	Coinbase Custody
BTC	Grayscale Mini Trust	0.15%	Permanent	Coinbase Custody
GBTC	Grayscale Bitcoin Trust	1.50%	Standard	Coinbase Custody

Fee structures vary and may change. Fee waivers are temporary. Evaluating the overall cost implications of any investment is typically a discussion for a qualified financial advisor.

Custody Concentration

Multiple major Bitcoin ETFs utilize Coinbase for custody services. This concentration means that operational issues at a single custodian could potentially affect multiple funds simultaneously. This is a structural characteristic of the current ETF landscape, not unique to any single product.

Part VI: Tax Reporting Considerations

This section addresses tax compliance matters—the core expertise of a CPA firm.

Form 1099-DA Implementation

Effective January 1, 2026, the IRS implements Form 1099-DA (Digital Assets), requiring brokers to report cost basis on cryptocurrency transactions.

This creates significant compliance requirements for taxable accounts:

• Wallet-by-wallet tracking: Pooled cost basis is no longer permitted

• Transaction-level documentation: Every acquisition and disposition requires records

• Broker reporting: The IRS will receive data enabling cross-referencing

Retirement Account Treatment

Qualified retirement plans are classified as "exempt recipients" for 1099 reporting purposes. Transactions within a 401(k) do not generate 1099-DA forms during the accumulation phase—taxation occurs upon distribution.

This structural difference is a factual distinction between account types, not a recommendation for asset placement.

Roth vs. Traditional: Tax Considerations

The question of which account type is appropriate for volatile assets involves multiple factors:

Traditional accounts: Contributions may be tax-deductible; distributions taxed as ordinary income; losses reduce the taxable distribution but cannot be separately harvested.

Roth accounts: Contributions are after-tax; qualified distributions are tax-free; losses within the account cannot be harvested for tax benefit.

The "optimal" account placement depends on individual tax circumstances, time horizons, and overall financial situations. Asset location decisions are investment-advisor territory, not tax-preparer territory.

Tax Compliance Risks to Understand

UBTI Considerations: While standard spot Bitcoin ETFs generally do not generate Unrelated Business Taxable Income, other cryptocurrency-related investment vehicles may. UBTI is taxable even within an IRA.

Wash Sale Uncertainty: Current wash sale rules apply to "securities." The IRS may clarify or expand application to cryptocurrency as broker reporting begins in 2026.

Prohibited Transactions: Self-directed accounts have prohibited transaction rules. Certain transactions with disqualified persons or for personal benefit can disqualify an entire account.

Part VII: The New Jersey Tax Landscape

For New Jersey residents, cryptocurrency transactions involve additional complexity.

New Jersey conforms to federal treatment of virtual currency as property. When cryptocurrency is used to purchase goods, the state treats it as a barter transaction:

• Sales tax (6.625%) applies to the item purchased

• Capital gains tax (up to 10.75%) applies to any appreciation in the cryptocurrency used

This dual-tax treatment makes using cryptocurrency for purchases particularly complex from a compliance perspective.

Combined with 1099-DA requirements and wallet-by-wallet tracking, cryptocurrency tax preparation has become a specialized discipline.

Part VIII: Questions for Individual Evaluation

Rather than providing a "how to get started" guide—which would inappropriately suggest a course of action—this section outlines questions individuals typically need to answer before making decisions about their retirement accounts:

1. Does my plan permit access? Not all plans offer SDBAs, and not all SDBAs permit cryptocurrency ETFs.

2. What are my plan's specific restrictions? Plan rules vary significantly by employer and provider.

3. What is my risk capacity? This is distinct from risk tolerance and involves what a financial plan can structurally absorb. This question is properly addressed with a qualified financial advisor.

4. What are the tax implications for my situation? A tax professional can help identify relevant considerations.

5. Do I understand this asset class? Understanding should precede any investment decision.

6. Have I consulted appropriate professionals? Financial advisors address investment questions; tax professionals address compliance questions.

Part IX: Risk Categories

The following risks are associated with Bitcoin ETFs in retirement accounts:

Category	Description
Price Volatility	Bitcoin routinely experiences significant price swings
Regulatory Evolution	Rules and tax treatment continue to develop
Custody Concentration	Multiple ETFs share custodial arrangements
Plan Access Limitations	Not all plans permit these investments
Fee Complexity	Structures vary and waivers expire
Fiduciary Uncertainty	ERISA obligations for plan sponsors remain
Tax Compliance Burden	Outside retirement accounts, reporting is complex

Frequently Asked Questions

Can I access Bitcoin ETFs in my 401(k)?It depends on your specific plan. Some plans offer access through self-directed brokerage windows; many do not. Check with your plan administrator.

What is a Bitcoin ETF?An exchange-traded fund that holds Bitcoin and is designed to track its price, allowing exposure through traditional brokerage infrastructure.

What is a self-directed brokerage account?A feature in some 401(k) plans allowing participants to access investments beyond the plan's standard menu, subject to plan-specific restrictions.

What are the tax differences between holding crypto inside vs. outside a retirement account?Retirement accounts are generally exempt from transaction-level tax reporting during the accumulation phase. Taxable accounts are subject to 1099-DA reporting beginning in 2026. Distribution from retirement accounts is taxed according to the account type (Traditional vs. Roth).

Should I invest in Bitcoin ETFs?This is an investment question that should be addressed with a qualified financial advisor who understands your complete financial situation. A CPA can address tax implications but does not provide investment recommendations.

Scope of This Article

This article describes:

• Regulatory developments affecting retirement plan access

• Tax reporting requirements and structural differences between account types

• Risk categories and compliance considerations

• Questions individuals typically evaluate

This article does not:

• Recommend any investment or allocation

• Suggest any ETF is preferable to another

• Advise on whether cryptocurrency exposure is appropriate for any individual

• Provide financial planning or investment advisory services

About Monaco CPA

Monaco CPA is a virtual accounting firm specializing in cryptocurrency taxation, headquartered in Livingston, New Jersey. Founded by Gregory Monaco, CPA, MBA, the firm serves clients nationwide with tax compliance services for cryptocurrency holdings.

Our scope: Tax return preparation, cost basis reconciliation, 1099-DA compliance, and helping clients understand the tax implications of their cryptocurrency activities.

What we do not provide: Investment advice, portfolio allocation recommendations, or financial planning services.

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© 2025 Monaco CPA. All rights reserved.

Disclaimer

This article is for educational and informational purposes only. It does not constitute investment advice, tax advice, legal advice, or any recommendation to buy, sell, or hold any security or cryptocurrency.

The information reflects conditions as of December 28, 2025, and may become outdated. Cryptocurrency is a volatile and speculative asset class. Past performance does not guarantee future results.

Product names and ticker symbols are referenced for educational context only, not as recommendations.

Consult qualified professionals—including registered investment advisors, tax professionals, and legal counsel—before making decisions about retirement accounts or investments.

Monaco CPA provides tax compliance services and does not provide investment advice.