By Jude Ayua
The recent developments in the United States indicate that governments are beginning to integrate cryptocurrencies into their payment services for transactions with citizens. This reflects a growing interest among governments in the potential benefits of cryptocurrencies, recognizing their economic, social, and other advantages. Other jurisdictions could adopt similar measures to improve public services.
Florida official advocates Bitcoin’s inclusion in state pension funds.
Florida’s Chief Financial Officer, Jimmy Patronis, has urged the State Board of Administration (SBA), the agency responsible for managing the state’s retirement funds to consider investing in Bitcoin. In Patronis’s October 29 letter to Chris Spencer, Executive Director of the SBA, he highlighted Bitcoin’s reputation as “digital gold,” and suggested it could “diversify the state’s portfolio and provide a secure hedge against the volatility of other major asset classes.”
Patronis urged the SBA to “provide a report on the feasibility, risk, and potential benefits of directing a portion of state retirement system monies into digital asset classes,” with the findings requested before the next legislative session in March 2025. He also proposed the possibility of launching a “Digital Currency Investment Pilot Program” within the Florida Growth Fund, which is permitted to allocate up to 1.5% of the Florida Retirement System Trust Fund and has invested $998 million in high-growth ventures between 2022 and 2023.
Potential benefits for pensioners
Patronis noted that Bitcoin investment could benefit Florida’s pensioners which include firefighters, teachers, and police officers, by prioritizing returns on investment for Floridians.
“When managing state pensions for firefighters, teachers, and police officers, it’s also essential to prioritize the bottom line and ensure the best return on investment for Floridians. This is where the potential of investing in a cryptocurrency, like Bitcoin, becomes particularly compelling,” he said.
Read also: UK to Recognize Crypto as Personal Property
Read also: Coinbase integrates Apple Pay to boost crypto adoption in the UK.
Crypto investments by other US states
Governments’ crypto investments have become a recent trend among US states. Wisconsin and Michigan have incorporated crypto into their state retirement portfolios, as noted in a Cointelegraph report. In May, the State of Wisconsin Investment Board (SWIB) revealed it had allocated $164 million to spot Bitcoin ETFs from Grayscale and BlackRock, representing about 0.1% of its assets.
Also, in July, Michigan’s retirement system disclosed an investment in Bitcoin through 110,000 shares of ARK 21 Shares’ ETF, totaling approximately 0.003% of its assets under management.
UK pension fund adds bitcoin to balance sheet.
In a similar development, an undisclosed UK pension fund has made a historic pioneering move adding bitcoin to its balance sheet. On Monday, pensions advisory firm Cartwright announced that it had recommended to its unnamed UK client to allocate 3% of their portfolio to bitcoin.
Cartwright cited bitcoin’s strong long-term performance as the reason for its recommendation, noting the cryptocurrency’s nearly 100,000% price increase since 2013, according to data from CoinGecko. “Trustees of the unnamed scheme choose to make a 3% Bitcoin allocation, reflecting the scheme’s relatively long investment time horizon,” the announcement stated.
Sam Roberts, Cartwright’s director of investment consulting, expressed his hope that this “strategic move” would inspire others.
“We are proud to have led this groundbreaking move which we hope will be the start of a trend for institutional investors in the UK to catch up with their increasing number of peers and competitors around the world who are already taking advantage of Bitcoin’s unique attributes.”
Cartwright also noted that it anticipates institutional Bitcoin adoption will mirror the gradual acceptance of equities by pension funds in the 1970s which was slow at first, but eventually becoming a standard component of portfolios.
This development reflects the global surge in institutional adoption of Bitcoin, especially in the US. Major Wall Street firms such as BlackRock and Fidelity have introduced these Bitcoin ETFs and have collectively acquired over 1 million Bitcoin, valued at approximately $67 billion at current prices as of November 2024.
Read also: Microsoft tells shareholders to reject bitcoin investment proposal.
Prospects for government investments in bitcoin
Governments in other countries could follow the examples of Florida and other U.S. states by integrating bitcoin into public services and consider investing in it to enhance portfolio diversity and potentially hedge against traditional market volatility. By allocating a small percentage of state funds to bitcoin, governments can test the viability of crypto assets while anticipating potential higher returns, as seen in Florida’s proposed “Digital Currency Investment Pilot Program.” In addition, using Bitcoin in public service transactions such as tax payments, utilities, or fees could diversify payment options, reduce transaction costs, and provide faster, more efficient services for citizens.
However, governments should be aware of the inherent risks in adopting bitcoin for public services. Bitcoin’s high price volatility poses potential threats to fund stability, particularly for long-term investments like pension funds. Another factor is regulatory uncertainty. Uncertain or evolving regulations around cryptocurrencies could lead to legal and operational challenges. Security risks, including cyberattacks and fraud, require robust protections. Governments must consider diversification and establish clear guidelines for crypto management to protect citizen assets and maintain public trust.
Read also: Predictions and Analyses: Bitcoin Price before and after the US Elections
About the Author: Jude Ayua is a policy analyst at CAB. A lawyer, Jude is an associate at Infusion Lawyers where he is a member of the Blockchain & Virtual Assets Group. He is also a member of the Policy & Regulations Committee of the Stakeholders in Blockchain Technology Association of Nigeria (SiBAN). Jude reports and writes on crypto policy and regulations. jude@infusionlawyers.com
