Aave is a decentralised finance (DeFi) protocol: software running on blockchains that lets users lend and borrow crypto assets without a bank. Its governance token, also called AAVE, trades on crypto exchanges. As crypto became more mainstream, companies began offering ways to hold tokens like this in retirement accounts. The rules and the regulators' attitude have shifted considerably.
In IRAs
The IRS treats digital assets as property. There is no rule banning them from IRAs, so self-directed IRA custodians and some specialist providers allow investors to buy crypto assets inside an IRA. The usual IRA rules apply, including the ban on prohibited transactions. Practical questions include who holds the private keys, how assets are valued for required distributions, and whether the custodian supports a particular token. Using DeFi protocols directly from an IRA raises further issues about custody and prohibited transactions.
In 401(k)s
Workplace plans are governed by ERISA, which requires plan fiduciaries to act prudently and solely in participants' interests.
- 2022. On 10 March 2022 the Department of Labor issued a compliance release warning fiduciaries to exercise "extreme care" before adding cryptocurrency options to 401(k) plans, citing volatility, valuation and custody concerns.
- 2025. In May 2025 the Department rescinded that release, saying it would take a neutral stance. In August 2025 President Trump signed an executive order directing agencies to make it easier for 401(k) plans to offer alternative assets, including digital assets.
Even so, fiduciaries remain legally responsible for prudent choices, and most plans have not added crypto options.
The risks
- Volatility. Crypto prices can fall by more than half in short periods.
- Protocol and smart-contract risk. DeFi platforms can be hacked or fail because of software flaws.
- Regulatory risk. The legal status of many tokens in the US has been contested.
- Fees. Crypto IRA providers often charge higher fees than conventional brokerages.
The bottom line
Retirement money is meant for the long term and is hard to replace. Investors considering crypto in retirement accounts should understand the custody arrangements and limit exposure to an amount they could afford to lose.
Sources
General information about the law as it stood when this page was updated, not financial, tax or legal advice. Rules and limits change; check the official source or a qualified adviser before acting.