The incoming administration of President-elect Donald Trump, coupled with growing lobbying efforts, could see U.S. states adopt a more crypto-friendly stance in 2025, even as risks surrounding bitcoin remain high.
The new year arrives on the heels of a landmark 2024 for cryptocurrency, where bitcoin surpassed $100,000, the U.S. Securities and Exchange Commission (SEC) approved exchange-traded funds (ETFs) holding bitcoin, and Trump vowed to make the United States the “bitcoin superpower of the world.”
Proponents argue bitcoin is a hedge against inflation, much like gold, and believe government investments will stabilize its price and legitimize the asset. However, critics warn of its volatility and speculative nature, pointing to uncertain long-term returns.
A recent U.S. Government Accountability Office study highlighted these concerns, describing cryptocurrency investments as having “uniquely high volatility” with no standard approach for projecting future returns.
Crypto Policy on the Horizon
In statehouses across the country, analysts predict a surge of legislation aimed at fostering crypto adoption. Growing interest from venture capitalists and bitcoin miners has bolstered lobbying efforts, pushing states to explore investment options for public pension funds and treasuries.
A bill introduced last month in Pennsylvania’s House of Representatives sought to allow the state treasurer and public pension funds to invest in bitcoin. Though it stalled before the legislative session ended, its sponsor, Republican Mike Cabell, noted the intense public interest it generated.
“I had a friend who is a rep down the road text me, ‘Oh my god, I’m getting so many emails and phone calls to my office,’ more than he ever did about any other bill,” said Cabell, who lost his reelection bid but expects a colleague to reintroduce the measure.
Satoshi Action, a bitcoin advocacy group, predicts similar bills will be introduced in at least 10 other states next year.
Pension Funds Approach with Caution
Despite the momentum, experts say public pension funds remain cautious about investing in crypto. Keith Brainard, research director for the National Association of State Retirement Administrators, believes most funds are unlikely to make significant investments.
“There might be a bit of dabbling in bitcoin,” Brainard said. “But it’s difficult to envision a scenario in which pension funds right now are willing to make a commitment.”
Wisconsin’s state investment board became the first to test the waters earlier this year, purchasing $160 million in bitcoin ETFs—about 0.1% of its assets—before reducing the stake to $104 million. Michigan’s board later reported $18 million in bitcoin ETF purchases.
Steven Fulop, Democratic mayor of Jersey City and a candidate for New Jersey governor, has pledged to push the state’s pension fund into crypto investments if elected.
“We were ahead of the curve,” Fulop said. “And I think that’s what you’re eventually going to see—this is widely accepted, with regard to exposure in all pension funds, some sort of exposure.”
State-Level Innovation
Some states have already moved to integrate cryptocurrencies into their financial systems. Louisiana Treasurer John Fleming oversaw the introduction of a system allowing residents to pay government agencies using crypto. While Fleming emphasized flexibility in financial transactions, he remains skeptical of bitcoin as an investment.
“My concern is that at some point it’ll stop growing and then people will want to cash in,” Fleming said. “And when they do, it could tank the value of a bitcoin.”
In Pennsylvania, Treasury Department officials maintain they have the authority to decide whether crypto meets state investment standards. However, they note that cryptocurrency’s volatility makes it ill-suited for the short-term, conservative investments typically used to manage state funds.
Shifting Institutional Landscape
Institutional investment in crypto gained a significant boost this year with the SEC’s approval of bitcoin ETFs and related options. Major asset managers like BlackRock, Fidelity, and Invesco now offer bitcoin ETF products, creating tools that pension boards may find more attractive.
“Many [pension boards] are likely in the process of getting up to speed on what it means to invest in bitcoin,” said Mark Palmer, managing director at The Benchmark Company. “And that’s a process that typically takes a while at the institutional level.”
As 2025 approaches, bitcoin’s meteoric rise in 2024 will continue to shape financial policy debates in statehouses across the country, even as uncertainty over the asset’s future persists.