President Donald Trump has enacted an executive order designed to facilitate the incorporation of cryptocurrency into Americans’ 401(k) retirement accounts, a decision that has drawn criticism from financial experts as potentially hazardous.

Announced on Thursday, Trump’s executive order instructs the U.S. Department of Labor (DOL) to reassess its guidance on 401(k) plans that invest in alternative assets such as cryptocurrency, real estate, and private equity. The order further directs the Securities and Exchange Commission (SEC) to revise regulations to accommodate these investments.

This could result in regulatory modifications allowing 401(k) funds to allocate resources to crypto. Following the order, cryptocurrency values skyrocketed, with investors anticipating wider adoption.

Though 401(k) plans were not explicitly prohibited from investing in cryptocurrency before, the DOL had urged caution in 2022, highlighting concerns surrounding the speculative and erratic nature of these assets, along with issues related to recordkeeping and valuation.

The Trump administration subsequently rescinded this advice in May, contending that the previous administration’s warning constituted an “overreach.” Trump’s DOL adopted a neutral position regarding 401(k) plans and cryptocurrency investments.

The newly signed executive order reflects a favorable perspective towards 401(k) cryptocurrency investment, with Trump striving to position the U.S. as the “crypto capital of the world.”

Despite assertions that assets like cryptocurrency provide competitive returns and diversification, financial experts caution against depending on them for retirement savings. Alicia H. Munnell from Boston College’s Center for Retirement Research labeled such investments a “terrible idea,” likening them to gambling and questioning their capacity to enhance returns.

Munnell asserted that participants lack understanding of the product, deeming it speculative and unstable, and unlikely to yield improved returns, rendering it an imprudent choice for 401(k)s. She criticized the DOL for permitting this sort of activity.

Numerous accounts of plummeting values, scams, hacks, and thefts underscore the dangers associated with cryptocurrency. Nevertheless, stories of rapid gains still entice investors. Trump’s executive order could motivate more individuals to investigate cryptocurrency, but its advantages remain unclear.