As a seasoned investor with over three decades of experience navigating the complex world of financial markets, I find myself intrigued by the unique dynamics unfolding in the realm of cryptocurrencies, particularly as they pertain to pension plans.
Public pension plans have more flexibility in investing a portion of their funds into cryptocurrencies, as compared to private pension plans which are bound by the fiduciary rules set forth by the Employee Retirement Income Security Act of 1974 (ERISA), according to attorney Allie Itami of Lathrop GPM.
As per Itami’s explanation, the Employee Benefits Security Administration (EBSA) – responsible for enforcing ERISA regulations – has advised against private pension plans investing in cryptocurrencies due to their early development and volatile nature, making them a potentially risky choice.
“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.”
Due to the rigid application of ERISA rules and the resulting legal responsibility for private pension administrators, it’s expected that most funds flowing into the cryptocurrency market from retirement investments will continue to originate primarily from state-managed pension funds, unless the current guidance is changed.
State pension funds embrace crypto
Multiple U.S. state and city retirement funds currently hold investments in cryptocurrencies. For instance, the State of Wisconsin’s Investment Board (SWIB) disclosed an allocation of approximately $164 million towards Bitcoin ETFs back in May.
In July, Michigan joined this trend by revealing a $6.6 million investment in Bitcoin ETFs. Later, in November 2024, it expanded its involvement with digital assets by purchasing 460,000 shares of each the Grayscale Ethereum Trust and the Grayscale Ethereum Mini Trust.
As a crypto investor, I’m advocating for the inclusion of Bitcoin (BTC) in Florida’s pension plans. In a recent letter, Florida’s Chief Financial Officer Jimmy Patronis highlighted Bitcoin’s role as “digital gold” and encouraged state pension funds to consider investment exposure to Bitcoin.
As a dedicated cryptocurrency investor, I firmly believe that the future of crypto remains strong. Bitcoin, in particular, stands out as a valuable asset for its ability to serve as a shield against rising inflation rates and a robust countermeasure against the growing trend of central banks issuing digital currencies.
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2024-11-22 21:21