Governor Ned Lamont of Connecticut on Monday signed legislation that will ban any state government entity from investing in cryptocurrency and other digital assets. The bill, H.B. 7082, passed unanimously in the Connecticut General Assembly.
“Neither the state nor any political subdivision of the state shall (1) accept or require payment in the form of virtual currency for an amount due to the state or the political subdivision, or (2) purchase, hold, invest in or establish a reserve of virtual currency,” the bill states.
The bill defines virtual currencies as any type of digital unit that is used as a medium of exchange or a form of digitally stored value that is incorporated into payment system technology. This includes cryptocurrencies like Bitcoin and Ethereum, as well as tokenized assets.
The legislation would ban the state from establishing a cryptocurrency reserve, and would bar any investment entity, such as public pension funds, from investing in digital assets.
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Connecticut’s six public plans, overseen by the Connecticut Retirement Plans and Trust Funds, include the $28 billion Teacher’s Retirement Fund, $25 billion State Employees’ Retirement Fund and $3.7 billion Municipal Employees Retirement Fund.
Texas, last month, established a $10 million strategic Bitcoin reserve. New Hampshire and Arizona are two other states that have established SBRs, while legislation is currently pending in Massachusetts, Michigan, Ohio and Rhode Island.
The risk and volatility associated with digital assets make the asset class largely unsuitable for the portfolio of a public plan, and few CIOs, if any, would seriously consider significant allocations to digital assets. Only a handful of public funds have exposure to cryptocurrency, and those who do choose to invest via exchange-traded funds.
“The volatility and unpredictability of the price of virtual currency relative to fiat currency may result in a significant loss over a short period of time,” the bill states.
A December white paper from the BlackRock Investment Institute notes that Bitcoin has seen six drawdowns of more than 70% since 2015, including two drawdowns of more than 80%. The same paper states that for an investor considering the asset class, a 1%-2% allocation to Bitcoin is most optimal for a multi-asset portfolio.
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Tags: Bitcoin, Connecticut, Digital Assets, Ned Lamont
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