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Grayscale CEO Says Pension Funds Are Actively Exploring Crypto

2 mins
Updated by Ryan Boltman
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In Brief

  • Grayscale CEO says that pension and endowments are actively discussing plans to include crypto in their portfolios.
  • The first inclusion of crypto in a public pension fund was in 2021.
  • Other volatile assets have been included in retirement savings before.
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Grayscale CEO Michael Sonnenshein said that more pension fund companies are looking to add crypto to clients’ portfolios.

Talking with CNBC, Grayscale CEO Michael Sonnenshein said there is still interest in including cryptocurrencies in people’s pension portfolios, despite the recent market volatility. He noted that more pension funds are exploring the possibility while keeping one eye on the regulatory landscape.

“We are spending time with politicians and some of the largest pensions and endowments focused on diversifying their portfolios and actively exploring crypto allocation. It’s a different kind of consensus,” Sonnenshein told CNBC.

Fairfax County, Virginia, in 2019, was one of the first counties in the U.S. to invest over 8% of its customers’ pension money in cryptocurrency vehicles, using yield farming to generate 9% or more returns. The county’s Virginia Police Officers Retirement System also invested $50 million in Parataxis Capital Management’s fund that purchases cryptocurrencies and cryptocurrency derivatives.

Last year, an Israeli pension fund company Altshuler Shaham invested $100 million in the Grayscale Bitcoin Trust, allowing customers access to bitcoin. The Houston Firefighters’ Relief and Retirement Fund announced in October an investment in bitcoin and ether worth $25 million, Bloomberg reported, becoming the first U.S. public pension fund to offer crypto to its over 6600 benefactors.

Californian pension fund CalPERS holds shares in mining giant Riot Blockchain. Australia’s Queensland Investment Corporation, amongst the top five pension funds in the country, has expressed an interest in cryptocurrencies.

Government officials are against including crypto in retirement savings

Fidelity Investments announced in April 2022 that it would give members of its 401(k) plan the option to allocate up to 20% of their investment portfolio to crypto at their employers’ discretion. This plan was met with opposition from the U.S. Department of Labor at the time. “These investments present significant risks and challenges to participants’ retirement accounts, including significant risks of fraud, theft, and loss,” the department said. Senator Elizabeth Warren, a known crypto-critic, also opposed the plan, calling crypto the “new shadow bank “run by a “faceless” cohort of developers.

Too volatile?

Treasury Secretary Janet Yellen said crypto was too volatile to be included in pension funds, but more considerable pension funds already invest in risky instruments, such as commodities and private equity. In the 1970s in the U.K., railway pension funds put cash into art to hedge against inflation, The Times reports.

The Grayscale CEO disagreed with Yellen, calling her “short-sighted,” adding that investors know of crypto’s long-term gains.

Grayscale awaits feedback from the SEC regarding converting its Grayscale Bitcoin Trust to a spot-bitcoin ETF. The SEC is expected to make a ruling by July 6. In the meantime, the company beefed up its legal team with a former solicitor general, Donald Verrilli, and is preparing litigation for a potential court battle with the securities regulator.

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David Thomas
David Thomas graduated from the University of Kwa-Zulu Natal in Durban, South Africa, with an Honors degree in electronic engineering. He worked as an engineer for eight years, developing software for industrial processes at South African automation specialist Autotronix (Pty) Ltd., mining control systems for AngloGold Ashanti, and consumer products at Inhep Digital Security, a domestic security company wholly owned by Swedish conglomerate Assa Abloy. He has experience writing software in C,...
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