State pension plans have an easier time allocating a portion of their assets to cryptocurrencies than private pension plans, which must adhere to fiduciary regulations under the Employee Retirement Income Security Act of 1974 (ERISA), attorney Allie Itami of Lathrop GPM told Cointelegraph.
According to Itami, the Employee Benefits Security Administration (EBSA), which enforces the ERISA regulations, cited the nascent and volatile nature of cryptocurrencies as the primary reason for cautioning against private pension plans investing in digital assets. Itami explained:
“Regulators called the Department of Labor and specifically the agency that enforces ERISA — the EBSA — and in 2022, they came out with some compliance assistance guidance that was very skeptical about cryptocurrency in ERISA-covered plans. So, that has put a damper on ERISA-covered pension plans adding cryptocurrency.”
This strict enforcement of ERISA regulations and the ensuing fiduciary liability placed on private pension managers means that capital inflows into the crypto markets from retirement investment accounts will likely continue to be dominated by state pension plans until the guidance is reversed.
The EBSA guidance letter from 2022. Source: Allie Itami
Related: Bitcoin investment ‘material impact’ captures pension funds’ attention
State pension funds embrace crypto
Several state and municipal pension funds in the United States already have crypto exposure. In May, the State of Wisconsin Investment Board revealed a $164 million investment in Bitcoin ETFs.
Michigan followed suit in July by disclosing a $6.6 million investment in Bitcoin ETFs — later broadening its exposure to digital assets in November 2024 by acquiring 460,000 shares each of the Grayscale Ethereum Trust and the Grayscale Ethereum Mini Trust.
Florida’s chief financial officer, Jimmy Patronis — the official responsible for managing the state’s pension funds — is now pushing for Bitcoin (BTC) to be included in the state’s pension programs. Patronis noted Bitcoin’s function as “digital gold” in a letter urging the state pension funds to consider exposure to Bitcoin.
In a subsequent appearance on CNBC, Patronis said that “crypto is not going anywhere” and cited Bitcoin’s properties as a hedge against inflation and a resistance mechanism against central bank digital currencies.
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