Arizona Blocks Cryptocurrency Investment for Pension Fund

The Arizona State Retirement System has avoided investing in cryptocurrency after Governor Katie Hobbs vetoed Senate Bill 1025. The bill would have allowed the system to invest in virtual currencies like Bitcoin, but Hobbs viewed it as an untested investment.

This decision comes amid growing interest in Bitcoin ETFs among institutional investors. However, most pension funds pursue small allocations between 1% and 5% of their portfolios to maintain diversification.

The extreme volatility seen in cryptocurrency creates a massive threat to the long-term stability of retiree benefits. In 2017, Bitcoin prices fell by 75% from its peak in less than a year. Recently, the price dropped from $60,800 to $52,800, a nearly 15% decline.

Public pension plans lack the same protections as private plans because the Pension Benefit Guaranty Corporation does not insure them. Fiduciaries must evaluate how an investment fits within the plan's investment policy and its potential exposure to losses.