Grayscale CEO Says Pension Funds Are Actively Exploring Crypto

Grayscale CEO Michael Sonnenshein said more and more pension fund firms are looking to add crypto to their clients’ portfolios.

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

“We spend time with politicians and some of the biggest 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 United States to invest more than 8% of its customers’ pension funds in cryptocurrency vehicles, using the farming of return 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 buys cryptocurrencies and cryptocurrency derivatives.

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

California pension fund CalPERS owns shares in mining giant Riot Blockchain. Australia’s Queensland Investment Corporation, among the top five pension funds in the country, has shown 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 ability to allocate up to 20% of their investment portfolio to crypto at the discretion of their employers. This plan faced opposition from the US 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 the crypto a “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 larger pension funds are already investing in risky instruments, such as commodities and private equity. In the 1970s in the UK, railway pension funds invested money in art to hedge against inflation, reports the Times.

Grayscale’s CEO disagreed with Yellen, calling her “myopic,” adding that investors know the long-term gains in crypto.

Grayscale is awaiting comments from the SEC regarding the conversion of its Grayscale Bitcoin Trust into a spot-bitcoin ETF. The SEC is expected to issue a decision by July 6. In the meantime, the company has bolstered its legal team with a former solicitor general, Donald Verrilli, and is preparing litigation for a possible legal battle with the securities regulator.

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