North Carolina Home Approves Bills to Invest State Pension Funds in Cryptocurrency

The North Carolina House has passed two bills that could change the investment landscape for state pension funds, allowing up to 5% of assets to be invested in cryptocurrencies. If approved by the Senate, a new investment board will manage the $127 billion portfolio, amid concerns over the volatility of digital assets. State Treasurer Brad Briner supports the bills, aiming for broader investment strategies.

North Carolina has taken a significant step toward embracing the cryptocurrency landscape by passing two bills aimed at changing the management of state pension investments. The North Carolina House approved this week House Bill 506 and House Bill 92, which, still needing Senate approval, could make the state one of the pioneers in investing public funds in cryptocurrencies.

House Bill 506, much to the assembly’s approval, passed with a broad show of support at a 110-3 vote. This legislation proposes the establishment of a five-member North Carolina Investment Authority dedicated to overseeing the state’s hefty $127 billion investment portfolio. On the flip side, House Bill 92, which faced a bit more contention, managed to secure a 71-44 vote, allowing the allocation of up to 5% of state funds to be invested in cryptocurrencies.

Support is coming from State Treasurer Brad Briner, a Republican who took office just last November. Both of these bills mark a significant shift as they transfer investment decision authority from the treasurer to this newly-formed board, while simultaneously opening the door to new investment avenues such as digital assets.

The potential investment authority, as outlined, would consist of the treasurer and four other appointees, each selected by a mix of state officials. Importantly, all members are required to have expert investment knowledge and at least a decade of experience in managing pensions or investments. Furthermore, the board would be responsible for appointing a chief investment officer to manage third-party contracts.

This reform surfaces amid North Carolina’s struggling pension system, which currently faces a daunting $16 billion deficit. Recent years have seen lower-than-expected returns, which has fueled calls for a fresh look at investment strategies to bolster the fund’s health.

The bills are not without their limitations. For instance, investments in cryptocurrencies would not be made directly in currencies like Bitcoin but would be confined to mutual fund equivalents. Additionally, before any crypto investments are made, independent third-party assessments must confirm secure custody solutions and appropriate risk management. Recent updates have also opened discussions around enabling retirement plan members the option to invest in digital assets via exchange-traded products.

Advocates, like Rep. Keith Kidwell from Beaufort, argue for a diversified approach towards investment. “We need to spread the allocation around,” he stated, echoing sentiments shared by seasoned investment brokers. However, not everyone is convinced. Democratic representatives have raised flags about the inherent volatility of cryptocurrencies, with Rep. Maria Cervania of Wake County voicing significant concerns over the proposed investment strategy.

The bill has drawn mixed reactions beyond the legislature too; while Democratic Governor Josh Stein has come out in favour, the State Employees Association of North Carolina stands firmly against it. Among the proposals, there’s even talk of a potential strategic reserve of digital assets for the state, alongside options allowing state employees to include cryptocurrency in their personal investment portfolios.

In a broader context, North Carolina’s bold moves follow in the footsteps of Arizona, which has already made strides towards establishing a state-level cryptocurrency reserve. If North Carolina’s legislation makes it through the Senate and becomes law, decision-making regarding digital asset investments would be turned over to the new investment board, guided by third-party evaluations. This, in essence, is part of a wider trend as state governments probe opportunities in the digital asset landscape, weighing investment prospects against the rollercoaster that is the cryptocurrency market.