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​Coining a New Phrase

Fiduciary Governance

A large insurance company recently allocated $100 million to Bitcoin.[1] In a 2020 survey of nearly 800 institutional investors from the United States and Europe, 36% of respondents confirmed that they are positioned with digital asset exposure; among U.S. respondents, 27% had long digital asset positions.[2] And institutional investment portfolio optimizers now encourage portfolio managers to allocate 0.5% to 1.3% to digital currency.[3]

Plan sponsor fiduciaries are being approached by plan participants clamoring for access to cryptocurrency or a direct Bitcoin investment option within the retirement plan. How should a Retirement Committee member address such a request? 

From the Top

The Securities and Exchange Commission (SEC), which oversees U.S. investment directives, has communicated that they do not oversee currency—and cryptocurrency is currency, not a security (although the SEC has initiated multiple actions orbiting “Initial Coin-related Offerings” and digital asset fraud). Its Division of Examinations has publicly warned that “digital assets create unique risks for investors.” 

Would Bitcoin and cryptocurrency investors benefit if the SEC installed trading curbs, or somehow oversaw the non-registered cryptocurrency markets? Has the lack of SEC regulation stifled the cryptocurrency markets, or does it contribute to the allure and current valuations of cryptocurrency? 

Amid the turmoil of the 2008 financial crisis, 12 U.S. banks enjoyed the moniker “too big to fail.” At that time, their assets and liabilities were large enough to be considered a threat to the U.S. financial system. Is cryptocurrency now “too big to regulate”? Restrictions and limits by the SEC could be instituted, but they would not apply outside the United States. Is regulation even possible? 

Read more commentary from Steff Chalk here.

The Scope

Cryptocurrency functions as a currency, but it offers investors significantly more. Pandering to the cerebral experience, participating in electronic digital assets provides the user/investor: 

  • a high-profile trending investment;
  • participation in a counter-movement;
  • a casino-type gambling rush, 
  • access to the custodian’s continuous compounding screen;
  • 24-hour trading (with beeps, bells and blinking notifications); and 
  • instantaneous valuations. 

The investor experience is an endless buffet of endorphin releases.

But benefits are deeper and broader than what occurs in the brain during Mr. Toad’s wild ride! Cryptocurrency offers additional characteristics to the investment world, many of which are recognized in Modern Portfolio Theory (MPT). But looking at how cryptocurrency “behaves” relative to MPT tells a different story. Through the end of the first quarter of 2021, the volatility was not off the charts, but only because the charts were recalibrated—more than once! 

When seeking a reliable diversification tool, there are no known financial assets that provide the level of diversification that cryptocurrency delivers. Since cryptocurrency does not correlate with any present-day or historical financial assets, the diversification it brings to a portfolio is unparalleled. As an inflation hedge, cryptocurrency again receives exceptionally high marks. Volatility is present; however, a strong argument can be made that the reward is relative—perhaps, even understated—to the commensurate risk associated with the asset. 

Not for Every Retirement Committee

Prior to adding a cryptocurrency option to qualified plans, advisors and fiduciaries need a comfort level with the forms and documentation involved, as well as the restrictions around passwords—all frequently referred to as “friction.” (“Consternation” is a more accurate description.) The magnitude of friction becomes a stopping point for many investors and fiduciaries. Nonexistent regulation combined with the decentralized nature of the cryptocurrency have made due diligence close to impossible. The cryptocurrency world is built on anonymity. Scarcity, liquidity and control are major factors, since the supply is difficult to comprehend.

The known risks of cryptocurrency are significant. For the time being, that will keep many plan fiduciaries from adding cryptocurrency to their plans. And the unknown risks remain just that. 

Steff Chalk is the Executive Director of The Retirement Advisor University (TRAU), The Plan Sponsor University (TPSU) and 401kTV. This column first appeared in the Summer issue of NAPA Net the Magazine.


  1. Vigna, Paul. “MassMutual Joins the Bitcoin Club with $100 Million Purchase,” The Wall Street Journal (Dec. 10, 2020), at (subscription required).
  2. June 2020 Fidelity Digital Assets℠ survey, at
  3. Liew, Jim Kyung-Soo and Hewlett, Levar. The Case for Bitcoin for Institutional Investors: Bubble Investing or Fundamentally Sound? (Dec. 5, 2017), at SSRN: