Grayscale CEO Says Pension Funds Are Actively Researching Crypto

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Grayscale CEO Michael Sonnenshein said that more and more pension funds are looking to add crypto to customers’ portfolios.

Speaking to CNBC, Grayscale CEO Michael Sonnenshein said that despite recent market volatility, there is still interest in adding cryptocurrencies to people’s retirement portfolios. He noted that more and more pension funds are exploring the possibility while keeping an eye on the regulatory landscape.

“We spend 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, was one of the first counties in the US in 2019 to invest over 8% of its clients’ retirement funds in cryptocurrency vehicles and generate 9% or more returns through yield farming. The Virginia County Police Officer Pension Scheme also invested $50 million in the Parataxis Capital Management fund, which buys cryptocurrencies and cryptocurrency derivatives.

Last year, an Israeli pension fund company, Altshuler Shaham, invested $100 million in the Grayscale Bitcoin Trust to provide customers with access to Bitcoin. The Houston Firefighters’ Relief and Retirement Fund announced a $25 million investment in Bitcoin and Ether in October, Bloomberg reported, becoming the first U.S. public retirement fund to offer crypto to its 6,600+ benefactors.

California pension fund CalPERS owns shares in mining giant Riot Blockchain. Australia’s Queensland Investment Corporation, one of the country’s top five pension funds, has expressed an interest in cryptocurrencies.

Government officials are opposed to adding crypto to retirement plans

Fidelity Investments announced in April 2022 that it would allow members of its 401(k) plan to allocate up to 20% of their investment portfolio to crypto at the discretion of their employers. This plan met with opposition from the US Department of Labor at the time. “These investments pose significant risks and challenges to participants’ retirement accounts, including significant risks of fraud, theft and loss,” the department said. Senator Elizabeth Warren, a well-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 is too volatile to be included in pension funds, but larger pension funds are already investing in risky instruments such as commodities and private equity. In the 1970s, UK railway pension funds put money in art to insure against inflation, reports The Times.

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

Grayscale is awaiting feedback from the SEC regarding the conversion of its Grayscale Bitcoin Trust into a spot bitcoin ETF. The SEC is expected to make a decision by July 6. In the meantime, the company has bolstered its legal team with a former Attorney General, Donald Verrilli, and is preparing litigation for a possible court battle with the Securities and Exchange Commission.

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