Bitcoin Retirement Era

Author: Thejaswini

Introduction

For most of the 20th century, the answer to this question was simple: it was determined by your employer. The company provided pensions, managed investments, and bore the risks. If the fund performed well, they kept the extra profits; if the fund performed poorly, they covered the shortfall. You had no say, but you also wouldn't incur any losses.

Subsequently, the emergence of the 401(k) plan shifted responsibility onto individuals. You get to choose your investments and bear the risks. However, your choices are not entirely free. Employers still act as gatekeepers, offering only a set of “prudent” options. Initially, courts deemed common stocks too risky for retirement accounts. Later, index funds were considered too passive. The definition of prudence has evolved, but the paternalistic approach remains.

On October 15, 2025, Morgan Stanley redefined the boundaries. The company's 16,000 financial advisors can now recommend Bitcoin investments to any client, including those holding IRAs and 401(k). There are no minimum wealth requirements and no aggressive risk tolerance requirements. Bitcoin is simply appearing quietly alongside bonds and blue-chip stocks in the portfolios funding American retirement.

The risks are enormous. The total amount of retirement assets in the United States is $45.8 trillion. Even if only 1% of the assets are allocated to cryptocurrencies, it would mean $270 billion flowing into the market. If it's 2%, that would be over $500 billion.

What is the beautiful mathematical principle behind this? I have some ideas to share.

Morgan Stanley Opens a New Era of Cryptocurrency Retirement Investments

Until October last year, Morgan Stanley restricted access to cryptocurrency for clients with assets exceeding $1.5 million, a high-risk tolerance, and a taxable brokerage account. Retirement accounts were completely prohibited.

These restrictions no longer exist.

Advisors will not directly purchase Bitcoin for clients. Instead, they will allocate funds into regulated crypto investment products, primarily Bitcoin ETFs from BlackRock and Fidelity. In the future, once approved, it may include Ethereum and Solana ETFs.

The company's automated portfolio system tracks each client's cryptocurrency asset exposure in real time to prevent over-concentration. Morgan Stanley's Global Investment Committee recommends that for young or aggressive investors, the “opportunity growth” portfolio allocation is 4%, the balanced growth portfolio allocation is 2%, while the preservation or income strategy is 0%.

These restrictions serve as a legal shield. Under the Employee Retirement Income Security Act (ERISA) of 1974, which governs retirement plans and defines “prudent” investments, companies sponsoring 401(k) plans have a fiduciary duty to act in the best interests of participants. If the company offers imprudent or overly risky investments without proper oversight, participants can sue for losses. To win, the plaintiff must prove that the fiduciary breached their duties by offering inappropriate investments or failing to adequately monitor them.

Morgan Stanley's 4% cap and real-time risk monitoring design are aimed at defending against such lawsuits. The company bets that conservative allocation limits and real-time risk monitoring will protect it from allegations of negligence that expose retirees to the volatility of cryptocurrencies. Whether this defense holds up when Bitcoin drops 70% has yet to be tested.

Advisors must record cryptocurrency recommendations through the internal system. The compliance team ensures that clients confirm the volatility disclaimer and risk tolerance adjustments before investing.

Although Bitcoin ETFs are available immediately, Morgan Stanley's E-Trade platform will launch direct trading of Bitcoin, Ethereum, and Solana in 2026, supported by Zerohash infrastructure.

This is still highly regulated, with strict limitations on risk scoring and allocation software. However, it effectively turns cryptocurrency into a mainstream investment option accessible through 80% of U.S. retirement accounts managed by Morgan Stanley.

Why now? The policy window has just opened.

Three regulatory changes have created conditions for Morgan Stanley's initiatives.

First, the executive order signed by President Trump in August directed the Department of Labor (DOL) and the Securities and Exchange Commission (SEC) to revisit the rules regarding alternative investments in 401(k) and IRAs. The order effectively rewrote the boundaries of retirement investing, signaling to financial institutions that regulatory backlash is no longer an issue.

Secondly, the GENIUS Act signed in July established the first comprehensive stablecoin regulation in the United States. By requiring 1:1 dollar reserve backing and quarterly audits, this law reduces systemic vulnerabilities and instills confidence in institutions that the crypto infrastructure now has regulatory legitimacy.

Third, the Department of Labor overturned its cautious stance on cryptocurrencies in retirement plans from 2022. By allowing trustees to evaluate crypto investments based on traditional ERISA standards, the Department of Labor has normalized the inclusion of cryptocurrencies in 401(k) and IRAs without the need for special exemptions.

These changes have collectively created a narrow policy window. Morgan Stanley is the first mainstream wealth management firm to seize this opportunity, while competitors like Fidelity and Schwab are moving more slowly as their internal risk committees are still discussing exposure limits.

Wall Street concludes after interpreting regulatory signals: the risks of not providing cryptocurrency now outweigh the risks of providing it. But there is a deeper trend driving this shift: institutions now refer to it as “currency devaluation trading.”

This is consistent with the arguments held by gold enthusiasts and Bitcoin supporters over the years. Central banks will not stop printing money. Fiat currencies will lose purchasing power. Traditional safe-haven assets like gold are soaring, the US dollar index is on a multi-year downward trend, and investors are turning to assets with fixed supply. Once fringe ideas have now become institutional consensus. Bitcoin is now designed as a devaluation-resistant asset: fixed supply, transparent issuance, trustless verification. When the currency itself is revalued, Bitcoin no longer looks like speculation, but more like capital preservation.

Next Steps

Morgan Stanley's decisive actions have put pressure on other wealth management firms with retirement businesses. Here is the current situation of the major players.

Fidelity launched a no-fee cryptocurrency IRA in 2022, and now offers a spot Bitcoin ETF. As the largest provider of 401(k) by asset size, holding over a third of U.S. accounts, Fidelity has expanded to include Ethereum and Solana funds. However, it has yet to integrate cryptocurrencies into the retirement portfolios managed daily by advisors.

BlackRock's Bitcoin ETF (IBIT) holds $84 billion in assets, capturing 57% of the Bitcoin ETF market share. It is the fastest-growing ETF in history, potentially reaching $100 billion within 450 days. BlackRock's advantage lies in product dominance rather than distribution channels.

Charles Schwab plans to launch cryptocurrency spot trading in 2026, targeting Generation Z investors, who account for 33% of new accounts and are under the age of 28. Charles Schwab plans to roll out a full suite of products in early 2026, but retirement account access is not yet available.

Vanguard manages $10 trillion in assets and is exploring access to third-party crypto ETFs after years of resisting crypto assets. Under pressure from clients and the push from BlackRock's new CEO, Vanguard's policy has shifted to become more open to cryptocurrencies. However, among the major players, Vanguard remains the most cautious.

Goldman Sachs, through its GS DAP platform in partnership with BNY Mellon, focuses on tokenized money market funds and provides on-chain fund record services. The company is building tokenized asset infrastructure rather than seeking retail crypto exposure.

The broader banking industry is also taking action. JPMorgan is expanding its JPM Coin for cross-border settlements and servicing crypto funds. Citigroup plans to launch digital asset custody services in 2026 and has participated in the G7 stablecoin alliance. Bank of America, Deutsche Bank, UBS, and Barclays are all involved in multinational stablecoin research groups.

A new player worth noting is Erebor Bank, which is headquartered in Columbus, Ohio, and was founded by billionaire Palmer Luckey and Joe Lonsdale, both supporters of Trump. Erebor received conditional approval from the Office of the Comptroller of the Currency (OCC) in October. This bank, which focuses on technology and cryptocurrency, aims to provide services to emerging enterprises in areas such as artificial intelligence and digital assets. Its approval marks a sign that regulatory doors are opening for institutions engaged in cryptocurrency banking.

Traditional institutions are competing to integrate cryptocurrencies into existing wealth management infrastructures, while new players are building crypto-native tracks from scratch.

Although Morgan Stanley's move has introduced cryptocurrency into individual retirement accounts, state pension funds have quietly accumulated Bitcoin for over a year.

Wisconsin and Michigan disclosed holdings of BlackRock IBIT and ARK Bitcoin ETFs, totaling nearly $400 million.

The risk preferences of ordinary people and Wall Street institutional investors are acceleratingly merging. Pension funds operate under fiduciary obligations, which means their managers must demonstrate that every allocation is prudent and in the best interest of the beneficiaries. If they are willing to invest in Bitcoin, it is because they believe that the diversification of returns and asymmetric upside potential outweigh the volatility risks.

Now, through Morgan Stanley, retirement accounts have also joined this trend, highlighting the large-scale but discreet reallocation of long-term savings towards digital assets. Conservative strategies limit exposure to 5% of the portfolio, while aggressive allocations can be as high as 35%, depending on risk tolerance.

Bitwise analysts estimate that 1-2% of the $45.8 trillion in retirement assets shifting to cryptocurrencies, equivalent to $450 billion to $900 billion in inflows, could drive Bitcoin to $200,000. The first wave of funds may arrive this fall, coinciding with the potential interest rate cuts by the Federal Reserve.

But if the cryptocurrency drops by 70%, that would be a $300 billion loss in retirement, potentially affecting consumer spending and eroding trust in retirement advisors.

What happens when others follow suit?

Deutsche Bank analysts predict that by 2030, central banks may hold a large amount of Bitcoin and gold due to institutional adoption and a weakening dollar. Gold has surpassed the $4,000 per ounce mark, while Bitcoin's trading price is slightly below its historical high.

The share of the US dollar in global reserves has fallen from 60% in 2000 to 41% in 2025. This decline has driven record inflows into gold and bitcoin ETFs, reaching $5 billion and $4.7 billion in June alone.

JPMorgan analysts estimate that by 2027, the growth of the stablecoin market could translate into an additional $1.4 trillion in dollar demand, although this depends on overseas investment interest. The interplay between the rise of Bitcoin, the adoption of stablecoins, and the hegemony of the dollar is still unfolding.

However, it is evident that retirement portfolios are being rebuilt through Bitcoin ETFs, regardless of whether regulators, advisors, or retirees fully understand its implications.

If Fidelity, Charles Schwab, and Vanguard follow in Morgan Stanley's footsteps, the industry will essentially determine that cryptocurrency is no longer an alternative asset. It has become a core asset.