Pension funds have begun to show more interest in cryptocurrencies

Experts warn of risks associated with regulatory uncertainty in the market

10.10.2022 - 07:30

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2 min

What’s new? About 94% of state and local government pension funds in the United States invest in cryptocurrencies or companies related to this field. Such data is provided in a new Forbes article citing a 2022 study by the CFA Institute, a global non-profit financial education organization.

Material on the Forbes website

What other data has been published? State-sponsored pension funds invest in one or more cryptocurrencies, justifying their decision with the fact that this asset class has shown impressive returns over 12 years. That said, a number of experts warn of the dangers of such an approach. According to Anessa Allen Santos, a Florida attorney, no pension fund should be toying with cryptocurrencies now, as regulators have an increasingly negative attitude toward issuers of digital assets. The expert warns that an “overtly hostile” legal framework for the industry could emerge in the US.

One example of such risks, according to Santos, relates to Sand Vegas Casino Club, an online gaming platform. Created by anonymous developers, the platform put up more than 12 000 non-fungible tokens (NFTs) for sale with profit-sharing rights from sales on the OpenSea marketplace. Even though NFTs are generally considered commodities, the states of Texas and Alabama issued emergency cease and desist orders stating that these tokens were securities. In response, OpenSea removed the collection from the listing to avoid being charged with trading in unregistered securities.

Santos believes that pension fund managers must take special care to determine the properties of each digital asset at the time of investment and continue to monitor those assets for possible programming changes that could make investments illegal.

In June, US Treasury Secretary Janet Yellen said that cryptocurrency assets are a “very risky” choice to include in retirement plans. She commented on Fidelity’s proposal to invest retirement savings in bitcoin. The initiative was also criticized by the Department of Labor and Democratic senators.

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