HARRISBURG, Pa. — The recently elected administration of President Donald Trump is expected to foster a more favorable environment for cryptocurrency, potentially influencing state legislatures to adopt a pro-crypto stance. This shift may lead to increased investments by public pension funds and treasure departments in digital currencies like bitcoin.
Advocates of cryptocurrency assert that it serves as a robust hedge against inflation, comparable to traditional safe-haven assets like gold. Bitcoin supporters argue that with increased government participation, the currency could mitigate the concerns surrounding its price volatility and enhance its legitimacy in the financial market. This, they believe, would further support the value of bitcoin and other cryptocurrencies.
However, there are considerable risks involved in these investments. Critics emphasize the speculative nature of cryptocurrencies and caution investors about the uncertainty tied to potential returns. They warn that those diving into crypto should be prepared for possible financial losses. While only a few public pension funds have ventured into cryptocurrency, a recent study by the U.S. Government Accountability Office highlighted the high volatility of crypto investments, emphasizing that there is no standardized method to project future returns in this asset class.
The year 2024 marked a significant milestone for cryptocurrencies, with bitcoin’s value exceeding $100,000. Additionally, the U.S. Securities and Exchange Commission took a notable step by approving the first bitcoin exchange-traded funds (ETFs). In this new climate, cryptocurrency advocates are excited about Trump’s commitment to positioning the U.S. as the “bitcoin superpower.”
As lawmakers across various states embark on drafting cryptocurrency-friendly legislation, expectations are rising for the emergence of more supportive bills in 2024. Analysts note that the cryptocurrency sector is gaining momentum as it attracts a powerful lobbying force, with bitcoin miners establishing new operations and venture capitalists investing in technology firms focused on digital currencies.
In a potentially pivotal move, proposed legislation by Senator Cynthia Lummis from Wyoming aims to establish a federal bitcoin reserve system that states can utilize for their own investments. In Pennsylvania, a bill recently introduced in the House aimed to authorize the state’s treasurer and public pension funds to invest in bitcoin, garnering significant attention. Although the bill did not pass before the legislative session concluded, Republican sponsor Mike Cabell noted the high volume of responses he received from constituents, indicating strong interest.
Despite the gathering momentum, experts like Keith Brainard from the National Association of State Retirement Administrators express skepticism regarding the willingness of public pension funds to dive into cryptocurrency. These funds, overseeing nearly $6 trillion in assets, prioritize investment strategies with less volatility than what bitcoin currently offers. Brainard suggests that while there may be some isolated interest in bitcoin investments, major commitments from pension funds are unlikely to materialize anytime soon.
In Louisiana, Treasurer John Fleming implemented a system enabling citizens to pay government bills using cryptocurrencies, although he remains cautious about investing state funds in this volatile market. He cautioned that if cryptocurrency growth stalls, it could lead to a mass sell-off, which would drastically affect bitcoin’s value.
In Pennsylvania, treasury officials stated they have the authority to determine whether cryptocurrencies meet investment standards as per state law, suggesting that new legislation may not be essential. However, the unpredictability tied to such volatile assets makes them unsuitable for the agency’s main operations, which rely on stable investment returns to handle millions in annual expenditures. Currently, the large majority of investments are placed in low-risk, short-term instruments.
Long-term pension boards, while considering investments over a 30-year horizon, may already have minor stakes in companies associated with cryptocurrency. Nevertheless, they have not shown large-scale enthusiasm for direct bitcoin investments, although this may soon change. Mark Palmer, a managing director at The Benchmark Company, notes that pension boards are beginning to explore available tools for investing in bitcoin.
Several major asset management firms, including BlackRock, Invesco, and Fidelity, now offer bitcoin ETFs, indicating growing institutional acceptance of cryptocurrency investments.
Wisconsin made history in May by becoming the first state to invest in cryptocurrency, purchasing shares worth $160 million in two ETFs, which later adjusted to $104 million as of September 30. Similarly, Michigan’s investment board reported around $18 million in bitcoin ETF investments, while New Jersey gubernatorial candidate Steven Fulop expressed his intention to advocate for the state’s pension fund to diversify into cryptocurrencies upon his election. Fulop highlighted how Jersey City is poised to integrate bitcoin, planning to allocate up to 2% of the city’s employee pension fund to bitcoin ETFs.
Fulop emphasized the city’s proactive approach and believes it will soon become common for pension funds to have some level of cryptocurrency exposure. He stated, “We were ahead of the curve, and I think this is ultimately where we are headed.”
