March 7, 2024

Arizona Senate Considers Integrating Bitcoin ETFs into State Pension Investments

Arizona Senate's consideration of bitcoin ETFs for state pension investments mirrors a growing trend in diversifying traditional portfolios with digital assets.

The Arizona state Senate is currently deliberating on the inclusion of bitcoin exchange-traded funds (ETFs) and other digital asset ETFs into a portion of the state’s pension fund. A Fact Sheet prepared by the Senate Research staff on February 8, 2024, outlines this proposal.

The resolution, passed by the Senate and currently undergoing review by the FICO committee, suggests that both the Arizona State Retirement System (ASRS) and the Public Safety Personnel Retirement System (PSPRS) should assess the potential benefits and feasibility of incorporating digital assets into their investment portfolios.

Established in 1953, the ASRS endeavors to attract and retain employees through competitive pay, long-term incentives, and a secure retirement plan. Similarly, the PSPRS, founded in 1968, provides retirement benefits for public safety personnel facing hazardous duties.

The document urges both systems to evaluate the potential inclusion of digital asset ETFs, closely monitor developments in bitcoin and other digital asset ETFs, seek guidance from the Securities and Exchange Commission (SEC) regarding the inclusion of such assets, and submit reports regarding the potential of investing in digital asset ETFs.

While this legislative move is not anticipated to have a direct fiscal impact on the state General Fund, it reflects a broader trend among US states to diversify retirement funds through crypto investments. Notably, in 2021, a Houston firefighters’ pension fund invested $25 million in bitcoin and ether, while a Virginia police officers’ retirement system began allocating funds to crypto-related investments as early as 2019.

Mathew McDermott, Goldman Sachs’ global head of digital assets, sees the approval of spot bitcoin ETFs as a significant gateway for pensions and insurers to enter the crypto market.

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