States Could See Crypto Policy Blitz in 2025 Despite Risks

The arrival of a bitcoin-friendly administration under President-elect Donald Trump, coupled with expanding crypto lobbying efforts, could drive a wave of legislation in 2025 encouraging states to adopt more crypto-friendly policies. These initiatives may include authorizing public pension funds and treasuries to invest in cryptocurrencies like bitcoin, despite their volatility and associated risks.

Advocates Push for Broader Acceptance

Bitcoin proponents argue that increased government adoption will stabilize the cryptocurrency’s price, boost its legitimacy, and solidify its role as a hedge against inflation, similar to gold.

“It’s been a landmark year for crypto,” with bitcoin surpassing $100,000 and the U.S. Securities and Exchange Commission approving exchange-traded funds (ETFs) that hold bitcoin, positioning the United States as a potential “bitcoin superpower,” according to President-elect Trump.

Risks Highlighted

Critics caution that crypto remains a speculative and highly volatile asset. A recent U.S. Government Accountability Office (GAO) study on 401(k) investments in crypto highlighted the absence of standard approaches for projecting future returns, making such investments risky for institutions like public pension funds.

State Legislation on the Horizon

Several states are expected to introduce crypto-friendly bills in 2025, influenced by growing lobbying efforts and initiatives like Sen. Cynthia Lummis’ federal proposal to create a bitcoin reserve.

In Pennsylvania, a bill allowing the state treasurer and public pension funds to invest in bitcoin stirred significant public interest, though it did not advance before the legislative session ended. Republican Mike Cabell, the bill’s sponsor, expects it to be reintroduced.

Slow Adoption by Public Pension Funds

Despite growing interest, many public pension funds remain hesitant to invest in cryptocurrencies due to their volatility and short track record.

Keith Brainard, research director for the National Association of State Retirement Administrators, stated, “It’s difficult to envision a scenario in which pension funds right now are willing to make a commitment.”

Some states, however, have begun experimenting:

• Wisconsin: Invested $160 million in bitcoin ETFs earlier this year, later scaling down to $104 million.
• Michigan: Reported $18 million in bitcoin ETF purchases.
• Jersey City, New Jersey: Mayor Steven Fulop has proposed allocating up to 2% of the city’s $250 million employee pension fund to bitcoin ETFs.

A Long Road Ahead

Experts like Mark Palmer, a senior research analyst at The Benchmark Company, believe that institutional investors are still in the early stages of evaluating crypto investments.

“Many pension boards are kicking the tires, so to speak, and that’s a process that typically takes a while at the institutional level,” Palmer said.

As crypto gains traction, states face decisions balancing innovation with caution, navigating the risks and rewards of investing in an asset that could redefine financial markets.