30s Summary
State pension funds have greater flexibility to invest in cryptocurrencies compared to private pension schemes, which are tightly regulated by the Employee Retirement Income Security Act of 1974 (ERISA). According to attorney Allie Itami, ERISA regulators have voiced skepticism about including cryptocurrencies in these plans, adding hurdles for private pensions. Meanwhile, state pensions from Wisconsin, Michigan and potentially Florida, have invested or are considering investing in crypto assets. This trend may continue unless ERISA regulations change. The caution displayed by ERISA contrasts with some state funds considering crypto as protection against inflation and tools to resist central bank digital currencies.
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State pension plans find it a bit easier to put some of their money into things like cryptocurrencies than private pension plans do. This is because private pension plans have to stick to some strict rules set out in something called the Employee Retirement Income Security Act of 1974 (ERISA), as explained by a lawyer named Allie Itami from Lathrop GPM.
According to Itami, the group that makes sure these ERISA rules are followed, the Employee Benefits Security Administration (EBSA), has been warning private pensions about investing in digital money like cryptocurrencies. They have their doubts about this because it’s all pretty new and tends to go up and down in value a lot.
Itami shared that in 2022, the regulators at the Department of Labor, who are in charge of enforcing ERISA rules, came out with guidance that expressed their skepticism about cryptocurrencies in ERISA-covered plans. That caution has made it harder for ERISA-covered pension plans to include cryptocurrency.
Because of how strictly ERISA rules are enforced and because private pension managers could be held responsible for any losses, most of the money going into cryptocurrencies from retirement accounts is probably going to continue to come from state pension plans, unless something changes with these guidelines.
Some state and city pension funds in the US have already invested in cryptocurrencies. For example, in May, Wisconsin’s Investment Board shared they had invested $164 million in Bitcoin ETFs. In July, Michigan also jumped on board with a $6.6 million investment in Bitcoin ETFs. They even expanded their digital money investments in November 2024 by buying 460,000 shares each of the Grayscale Ethereum Trust and the Grayscale Ethereum Mini Trust.
Florida’s main money guy, Jimmy Patronis, who manages the state’s pensions, is now suggesting adding Bitcoin to the state’s pension programs. He said in a letter that Bitcoin could be thought of as “digital gold.” Afterward, in an interview on CNBC, he said that “crypto is not going anywhere,” talking about Bitcoin’s potential as a safety net against inflation and a tool to resist central bank digital currencies.