Do not forget that they also want tax, and do not forget that they will always want to get them KYCed as well.
For sure the government will know everything of your cryptocurrencies.
I treat people who invest in Bitcoin through 401k is similar to buy Bitcoin ETFs, both need to trust the company who custody it and the government.
Before the government will even consider this idea of introducing crypto, they must have thought about what they stand to gain and how tax will be applied. For now, we are not even sure if Trump will be introducing Bitcoin or an altcoin. Whatever it is, it is still good news that the government is gradually recognising crypto and allowing people to invest in it without strict restrictions. This is a good way to go for the crypto community. However, I must still add that people be allowed to decide if they want these crypto investment as a retirement plan or not.