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Cryptocurrencies, such as bitcoin and other digital assets like non-fungible tokens, pose “significant risks and challenges” to 401(k) investors, including fraud, theft and financial loss, the U.S. Department of Labor said Thursday.

The labor agency warned that employers that add crypto investments to their company 401(k) plans may easily run afoul of their legal obligations to workers who are plan participants.

That counsel comes as financial services firms have begun marketing such investments as retirement-plan options in recent months, playing off growing popularity, the bureau said.

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“At this early stage in the history of cryptocurrencies … the U.S. Department of Labor has serious concerns about plans’ decisions to expose participants to direct investments in cryptocurrencies or related products, such as NFTs, coins and crypto assets,” Ali Khawar, acting assistant secretary at the Employee Benefits Security Administration, wrote Thursday.

Employers who offer a 401(k) plan have a fiduciary duty relative to the investments they make available. That legal duty requires them to prudently select investments and monitor them on an ongoing basis.

This duty has been the crux of a flurry of 401(k) lawsuits filed over the past decade or so, which have alleged workers lost money due to excessive costs and losses from unwise fund choices.

Relative to crypto in 401(k) plans, the Labor Department outlined several risks and challenges in a compliance memo on Thursday.

Crypto is speculative, volatile and hard to value, and it may be challenging for investors to make an informed investment decision, according to the bureau. Other properties — like losing the asset forever in the event of forgetting a password — also pose hazards, the agency said.

Regulation may also change swiftly, the Labor Department said. President Joe Biden on Wednesday issued an executive order calling on the government to examine crypto’s risks and benefits. However, many crypto proponents viewed the order positively.

“The big question coming into the executive order was whether it was going to be balanced, whether it was going to talk about both the risks and the opportunities of crypto,” Matt Hougan, chief investment officer at Bitwise Asset Management, told CNBC. “It’s pretty close to the outcome we were all hoping for.”

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