States Poised for Cryptocurrency Legislation as Industry Gains Momentum
The upcoming year could bring a surge in state-level cryptocurrency policies as President-elect Donald Trump’s bitcoin-friendly administration takes office and lobbying efforts intensify. Advocates are aiming to make states more open to cryptocurrencies, including allowing public pension funds and treasuries to invest in bitcoin.
Proponents of bitcoin, often compared to gold as a hedge against inflation, argue that greater government involvement will stabilize its volatile price swings, enhance its legitimacy, and support its already rapid price growth. However, critics warn of significant risks, emphasizing the speculative nature of cryptocurrencies and the lack of a standardized approach to forecasting their returns.
The U.S. Government Accountability Office recently released a study on 401(k) plan investments in crypto, highlighting the “uniquely high volatility” of these assets. The report cautioned investors to be prepared for potential losses.
Bitcoin’s banner year in 2024 included surpassing the $100,000 mark, the approval of the first bitcoin exchange-traded funds (ETFs) by the U.S. Securities and Exchange Commission, and Trump’s pledge to make the U.S. the world’s “bitcoin superpower.”
Legislation on the Horizon
Experts predict a wave of new bills in 2025 aimed at making states more crypto-friendly. These efforts are buoyed by bitcoin miners expanding operations and venture capitalists funding a growing tech sector that supports cryptocurrencies.
At the federal level, legislation proposed by Senator Cynthia Lummis of Wyoming could establish a federal bitcoin reserve, providing a model for states to follow. In Pennsylvania, a bill introduced to allow public pension funds and the state treasurer to invest in bitcoin stirred considerable interest, though it failed to advance before the legislative session ended.
Republican lawmaker Mike Cabell, the bill’s sponsor, said the proposal generated unprecedented attention, adding that he expects a colleague to reintroduce it. Bitcoin advocacy group Satoshi Action anticipates similar bills to be introduced in at least 10 other states next year.
Challenges for Public Pension Funds
Despite the growing interest, many public pension fund professionals remain cautious. Keith Brainard, research director for the National Association of State Retirement Administrators, expressed skepticism about widespread adoption of bitcoin 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.”
Some states have already taken steps toward crypto adoption. Wisconsin became the first to invest in bitcoin ETFs, allocating $160 million before scaling back its investment. Michigan followed with smaller investments, while New Jersey gubernatorial candidate Steven Fulop has proposed allocating 2% of Jersey City’s pension fund to bitcoin ETFs.
Fulop, the Democratic mayor of Jersey City, said, “We were ahead of the curve. 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.”
As bitcoin continues to gain traction, the coming year could see a significant shift in the regulatory and investment landscape for cryptocurrencies.
