State pension plans can adopt crypto more easily than private plans

November 22, 2024 Coin Telegraph

Michigan pension fund maintains Bitcoin ETF investment, adds Ether ETFs

November 4, 2024 Coin Telegraph

South Korea’s pension fund bags 280K Coinbase shares: SEC data

November 16, 2023 Coin Telegraph

South Korea’s National Pension Service, one of the world’s largest pension funds, invested $20 million in Coinbase in Q3 of 2023.

The National Pension Service (NPS), a public pension in South Korea and one of the world’s largest pension funds, bought just over 280,000 shares of the global cryptocurrency exchange Coinbase in the third quarter of 2023, an investment that has gained 39% in value since the purchase.

The NPS acquired 282,673 Coinbase shares in Q3 of 2023, according to a stock holdings report filed with the United States Securities and Exchange Commission (SEC) on Nov. 15.

The investment is worth $27.7 million based on Coinbase’s last recorded close of $98.15 on Nov. 15, according to data from TradingView. According to the SEC filing, the NPS has acquired its Coinbase stock batch for about $19.9 million, which implies that the pension fund’s profit is roughly $7 million, or 39%.

According to a report by the local news agency News1, the recent Coinbase investment by South Korea’s public pension fund marks the first time the company has bought Coinbase stock. The NPS reportedly has had a policy of not investing directly in cryptocurrencies like Bitcoin (BTC) due to volatility.

In 2021, South Korea’s National Assembly reportedly criticized the NPS for its investment in a crypto-related business. In response, the NPS argued that it only invested in the exchange and that cryptocurrencies were not an investment target.

Coinbase stock has seen significant growth in 2023, surging to as high as $110 per share in July. Coinbase shares have added value of close to 170% year-to-date after starting 2023 at around $37, according to data from TradingView. The stock is still 74% down from its all-time highs above $300 in September 2021.

*Coinbase year-to-date price chart. Source: TradingView*

Coinbase’s massive growth in 2023 came despite the exchange facing a lawsuit from the U.S. SEC. Filed in June 2023, the lawsuit alleges that Coinbase violated U.S. securities laws by offering unregistered securities on its platform. In October, Coinbase once again disputed the SEC’s authority in crypto, arguing that its definition of security was too wide.

Additional reporting by Amaka Nwaokocha.

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$190B Ontario pension says no to crypto after FTX investment loss

April 21, 2023 Coin Telegraph

Coin Telegraph

The pension fund had invested twice in the now-bankrupt crypto exchange, once during the peak of the bull run in 2021 and again in early 2022.

The Onatario Teachers’ Pension Plan has decided to steer its investment away from cryptocurrencies.

The decision comes after the OTPP — which manages over $190 billion in assets — lost the entirety of its $95 million investment in crypto exchange FTX after it went bust in November 2022.

OTPP was one of the many backers of the now-bankrupt crypto exchange and had invested twice: Once during the bull market in 2021 and again during exchange’s Series C funding round in early 2022.

OTPP chief executive Jo Taylor said in an interview with the Financial Times that it’d be unwise for the pension fund to rush into another crypto investment. Taylor said that they are still processing what happened with the exchange, and they would be much more cautious before investing in emerging assets like digital currencies. The pension fund is responsible for offering pensions to over 330,000 teachers and school workers.

“We took our time and did a lot of due diligence on the business. It didn’t turn out the way we thought. We weren’t necessarily shown all the information we needed to know to make a balanced decision.”

The pension fund is now looking to direct its investment toward more traditional markets, such as real estate, and is aiming to gain exposure to the private credit sector. The investment plan provider is looking to invest 10 billion Canadian dollars ($7.4 billion) over the next three years to build its portfolio in the aforementioned domains.

Apart from OTPP, the Caisse de dépôt et placement du Québec (CDPQ), another prominent pension fund, lost its entire investment of $154.7 million in thetroubled cryptocurrency lender Celsius Network. Celsius was one among many crypto lenders that went under during the crypto contagion in the second quarter of 2022.

The dramatic collapse of FTX, at the time the third-largest crypto exchange, had a drastic impact on the entire ecosystem. The confidence of investors and venture capitalists in the crypto ecosystem reached a low point while crypto funding dried up. It also flipped the crypto ecosystem’s narrative on mass adoption and attracted regulatory scrutiny from around the world.

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Swedish pension fund Alecta dumps First Republic Bank shares after price plummets

March 21, 2023 Coin Telegraph

Banking

The Swedish fund was the bank’s fifth largest shareholder; the fund’s CEO said the uncertainty surrounding First Republic was too great.

Private Swedish pension fund Alecta has sold its shares in First Republic Bank, the American bank struggling to stay afloat after a serious drop in share value, a bank spokesperson announced March 21. Alecta was the bank’s fifth-largest shareholder.

Alecta took a loss in the deal after losing funds in the collapses of Silicon Valley Bank (SVB) and Signature Bank. First Republic Bank’s shares fell 87% after SVB was forced to close earlier this month. Regarding the latest developments, Alecta CEO Magnus Billing told Bloomberg:

“The uncertainty about First Republic’s future was too great, partly due to the fact that the lender was downgraded to junk status.”

According to media reports, Alecta took a $728 million loss on the sale of its First Republic shares. That loss came on top of roughly $862 million Alecta had in SVB and $310 million in Signature Bank before their closures.

The pension fund’s board asked Billing to investigate whether its "investment strategy, risk allocation and mandate for asset management is optimal” last week. The fund was also in communication with the Swedish Financial Supervisory Authority on its investment in the U.S. banks.

Alecta has about $116 billion in assets under management, representing the accounts of 2.6 million individuals and 35,000 companies in Sweden. The fund’s solvency ratio was unaffected by the losses from the U.S. banks.

The CEO of Alecta, the Sweden pension fund that lost over $1 billion in the SVB fallout, is concerned about "breaking the markets" if central bank tightening is "too aggressive" https://t.co/CHdP5OUDE5 pic.twitter.com/yQzD5Yj59m
— Bloomberg TV (@BloombergTV) March 14, 2023

After reaching a low of $12.15 on March 20, First Republic Bank’s shares were selling for $17.11 at the time of writing.

Silicon Valley Bank, which largely served the tech startup industry, filed for bankruptcy on March 17 after being forced to sell bonds at a loss to cover a bank run. Signature Bank was closed by New York state authorities on March 12 in an action supported by federal regulators. The bank held deposits of several crypto firms, including Coinbase, Celsius and Paxos, although a New York State Department of Financial Services spokesperson denied the closure was related to crypto.

Bitcoin retirement plans elicit caution from regulators

February 24, 2023 Coin Telegraph

Canada

Some investment experts believe adding digital assets to retirement funds could make sense when the market becomes more stable, but not right now.

Even as the crypto market continues to forge an impressive recovery from the 2022 bear market, the industry continues to attract the wrath of regulators worldwide, especially in the United States. Three U.S. financial watchdogs recently issued stern warnings to individuals looking to invest in retirement funds offering exposure to digital assets.

The U.S. Securities and Exchange Commission’s (SEC) Office of Investor Education and Advocacy, the North American Securities Administrators Association and the Financial Industry Regulatory Authority (FINRA) warned investors that individual retirement accounts (IRAs) that include cryptocurrencies could potentially be classified as “securities,” unless they are registered with the SEC or have a valid exemption certificate.

Moreover, in the past year, many policymakers have continued to aim at cryptocurrency investment vehicles, such as retirement accounts, citing the string of insolvencies witnessed last year. For example, New York Attorney General Letitia James has repeatedly called for a ban on all crypto-inclusive contribution plans and IRAs.

Regulators are understandably cautious, with one Canadian teacher’s pension fund, the Ontario Teacher’s Pension Plan, taking a $95 million loss on its substantial stake in the FTX crypto exchange.

However, some prominent crypto proponents in the U.S. Senate, like Wyoming Senator Cynthia Lummis, believe that Bitcoin (BTC) should be a part of 401(k) retirement packages.

Are crypto retirement funds a good idea?

To better understand whether including cryptocurrencies in pension funds makes investment sense, Cointelegraph reached out to Ilan Sterk, CEO of Altshuler Shaham Horizon — an Israeli cryptocurrency custody and trading provider — one of the few crypto firms in the country approved to deal with banks.

According to Sterk, minimal exposure to digital assets can be a good fit for long-term retirement-centric investments. He added, “For pensioners, an investment portfolio can be allocated between various assets like securities, bonds, hedge funds, digital assets and private equity. Blockchain and digital assets are considered a relatively new field but with high utilization and a wide ecosystem, so allocating a conservative portion to such investments might be fruitful.”

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That said, he does agree with the warnings issued by the SEC and FINRA, especially since they pertain to retirement accounts containing the hard-earned savings of many people. Sterk said that crypto is a “very volatile investment for a retirement account” and, therefore, people investing in such offerings should take the time to understand the inherent risks associated with digital assets. He added:

“I believe that regulators are crucial to organizing new investment fields like digital assets as well as for laying out clear guidelines, especially for pension accounts, so investors won’t find themselves penniless upon reaching retirement.”

In 2021, the Israeli Capital Market, Insurance and Savings Authority published similar guidelines for local institutions — including provident funds and pension funds — telling institutions that should they decide to invest in Bitcoin, they must detail and explain their decision to the regulatory body.

Extreme volatility of crypto

Wade Wang, the founder and CEO of Safeheron — a digital asset self-custody provider that recently integrated its multi-party computation multisignature security solution with MetaMask — told Cointelegraph that it is “not recommended” that retirement funds seeking long-term returns be exposed to cryptocurrencies, at least in the near future. He added:

“Investing in digital assets comes with high uncertainty and severe volatility. So far, any coins or tokens within the crypto landscape are circulated within their own individual markets. The circulation between these different ecosystems, especially traditional ones like pension funds, requires considerably greater development.”

Wang highlighted that crypto should not be viewed differently from other investment forms. As the industry matures and novel Web3 applications emerge, many traditional funds — including family offices and retirement funds — will continue to eye digital assets.

Zoomers wants crypto in their retirement funds

According to a survey conducted by U.S. asset manager Charles Schwab during Q4 2022, almost 50% of zoomers and millennials want to see crypto become a part of their 401(k) retirement plans. Millennials were born in the early 1980s to mid-1990s, while zoomers were born in the mid to late 1990s and early 2010s.

Analysts for Charles Schwab found that 46% of zoomers and 45% of millennials would like to invest in cryptocurrencies as part of their retirement plans. Moreover, the survey found 43% of zoomers and 47% of millennials had already put a portion of their savings into digital assets outside their retirement plans.

*Younger investors want a wider range of investment choices, like cryptcurrencies. Source: Charles Schwab*

These results lay in stark contrast to another survey conducted by the investment manager, which found that just 31% of Gen X’ers and 11% of boomers — those born anywhere between the mid-1940s to late 1970s — were keen on investing in digital currencies through their 401(k) retirement plans.

Bill to remove roadblocks

On Feb. 15, Alabama Senator Tommy Tuberville announced he would reintroduce the Financial Freedom Act to allow American 401(k) retirement plans to gain cryptocurrency exposure. The bill, first tabled in the Senate in May 2022, seeks to reverse a policy from the U.S. Department of Labor (DOL) directing the type of investments allowed in 401(k) plans, including crypto.

In Tuberville’s words, the bill seeks to prevent the DOL from pursuing enforcement actions for individuals utilizing brokerage windows to invest in digital assets. “The federal government shouldn’t choose winners and losers in the investment game. My bill ensures that everyone who earns a paycheck has the financial freedom to invest in their futures however they see fit,” Tubernille added.

The bill’s co-sponsors include several prominent pro-crypto senators, including Cynthia Lummis, Rick Scott and Mike Braun. In a December 2022 interview, Senator Lummis stated that despite the recent market meltdown, she is still quite comfortable with the idea of Americans incorporating Bitcoin into their pension funds.

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Similarly, on Feb. 14, Florida Representative Byron Donalds said he wanted to table a bill similar to Tuberville’s in the House of Representatives. Both Donalds and Tuberville are likely to face stiff resistance from members of the Democratic party, as Senator Elizabeth Warren has repeatedly expressed her concerns about crypto being included in 401(k) plans. Senator Roger Marshall also shares a similar stance.

What lies ahead?

Since the beginning of 2022, the DOL has warned pension fund owners about crypto, asking them to exercise extreme caution when dealing with cryptocurrencies, citing the risk of fraud, theft and loss of funds. Other regulators have also adopted similar stances across the globe. As crypto adoption grows, time will tell how legislators come to view this novel asset class, especially from a long-term investment perspective.

JPMorgan’s CEO feels threatened by disruption in payment systems: Kevin O’Leary

September 28, 2022 Coin Telegraph

Coin Telegraph

At Converge22, the Shark Tank host said stablecoins are set to lead to a reduction in friction and fees worldwide.

JPMorgan Chase's CEO Jamie Dimon feels threatened by how the crypto space is disrupting the payment systems, stated the Shark Tank host and multi-millionaire venture capitalist Kevin O’Leary speaking at a Converge22 panel on Sept 28.

O'Leary made his remarks after Dimon declared himself as a “major skeptic” on "crypto tokens, which you call currency, like Bitcoin," referring to them as "decentralized Ponzi schemes" in his testimony to the United States Congress last week.

Still on the panel, O'Leary explained that friction is one of the major problems in the traditional financial system and, plus, it's how banks profit on transaction fees, adding that stablecoins could lead to a reduction in fees throughout the world. He stated:

"This isn't about speculation on asset price. This is about reducing the fees of how the world's economies work, more transparent, more productive, completely auditable, regulated, but less expensive. So, does Jamie Dimon feel threatened? You are damn right, he does. That is a big part of how he makes money."

Regarding the regulatory environment in the US, the venture capitalist explained that sovereign wealth and pension funds are waiting for regulation before adding digital assets to their portfolios, noting that:

"If you are a sovereign wealth fund or a country that is oil rich, perhaps you are generating a quarter of $1,000,000 in the 12 hours. The only place on earth you can plot that is in the S&P. The only way you can do that is to be compliant with the SEC rules. They are never going to make a move against the SEC in any way until these rules are determined."

According to O'Leary, a regulatory shift in the US approach to digital assets would lead to a 10% appreciation for all crypto assets overnight. US lawmakers are working on a bill to regulate stablecoins that could be approved by year's end.

Stablecoins are a class of cryptocurrencies that attempt to offer investors price stability, either by being backed by specific assets (such as the US dollar) or using algorithms to adjust their supply based on demand.

Pensions