Arizona Senate Advances Resolution to Consider Bitcoin ETFs for State Retirement Funds

The Arizona State Senate has passed a resolution that urges the state’s retirement systems to explore the possibility of investing in Bitcoin exchange-traded funds (ETFs), a new type of investment vehicle that tracks the price of the leading cryptocurrency.

JUST IN: 🇺🇸 Arizona Senate considers adding spot #Bitcoin ETFs to the states retirement portfolio. pic.twitter.com/ThhKniJCV2

— Watcher.Guru (@WatcherGuru) March 6, 2024

The resolution, which was introduced by Republican Senator Wendy Rogers, aims to provide the Arizona State Retirement System (ASRS) and the Public Safety Personnel Retirement System (PSPRS) with the information and guidance needed to make informed decisions about integrating Bitcoin ETFs into their portfolios.

What are Bitcoin ETFs and why are they important?

Bitcoin ETFs are funds that trade on stock exchanges and track the price of Bitcoin, allowing investors to gain exposure to the cryptocurrency without having to buy, store, or manage it directly.

Bitcoin ETFs are seen as a more convenient, accessible, and regulated way to invest in the digital asset, which has been growing in popularity and adoption in recent years.

Bitcoin ETFs are also considered to be a potential catalyst for the mainstream adoption of Bitcoin, as they could attract more institutional and retail investors, increase the liquidity and transparency of the market, and reduce the volatility and risk of the asset.

The US Securities and Exchange Commission (SEC) has recently approved the trading of Bitcoin ETFs, after years of rejecting and delaying applications from various firms.

The first Bitcoin ETF in the US, the ProShares Bitcoin Strategy ETF (BITO), started trading on October 19, 2021, and saw a record-breaking volume of over $1 billion on its first day.

Since then, several other Bitcoin ETFs have been launched or are in the pipeline, such as the Valkyrie Bitcoin Strategy ETF (BTF), the VanEck Bitcoin Strategy ETF (XBTF), and the Invesco Bitcoin Strategy ETF (BITC).

How would Bitcoin ETFs benefit Arizona’s retirement funds?

The resolution passed by the Arizona Senate states that Bitcoin ETFs could offer several benefits to the state’s retirement funds, such as:

• Diversifying their portfolios and reducing their exposure to traditional assets that are subject to inflation, devaluation, and geopolitical risks.
• Enhancing their returns and performance by capturing the growth and innovation of the cryptocurrency sector, which has outperformed most other asset classes in the past decade.
• Leveraging the expertise and services of firms that are approved by the SEC to offer Bitcoin ETFs, which could provide more security, compliance, and efficiency than directly investing in Bitcoin.

The resolution also acknowledges the potential risks and challenges of investing in Bitcoin ETFs, such as:

• The high volatility and unpredictability of the cryptocurrency market, which could result in significant losses or fluctuations in the value of the funds.
• The regulatory and legal uncertainties surrounding the cryptocurrency sector, which could affect the availability, accessibility, and legitimacy of Bitcoin ETFs.
• The technical and operational complexities of dealing with a new and evolving technology, which could pose issues such as hacking, fraud, or human error.

The resolution therefore urges the ASRS and the PSPRS to conduct a thorough and comprehensive analysis of the feasibility, implications, and options of directing a portion of the state retirement system funds into Bitcoin ETFs.

The resolution also requires the ASRS and the PSPRS to submit a report on their findings and recommendations to the Governor, the President of the Senate, the Speaker of the House of Representatives, and the chairpersons of the Senate and House committees on finance at least three months before the beginning of the next legislative session.

What are the next steps and prospects for the resolution?

The resolution, which was passed by the Senate on February 22, 2022, with a vote of 16-13, is now being reviewed by the House of Representatives for the second time.

If the resolution is approved by both chambers, it will become a concurrent resolution, which is a type of legislative measure that expresses the sentiment or opinion of the legislature, but does not have the force of law.

The resolution has received mixed reactions from lawmakers and stakeholders, with some supporting the initiative as a forward-thinking and innovative move, and others opposing it as a risky and speculative gamble.

The resolution has also sparked a debate on the role and responsibility of the state in managing the retirement funds of its public employees, and the extent to which it should embrace new and emerging technologies and trends.

The resolution is part of a broader trend of increasing interest and involvement of state and local governments in the cryptocurrency sector, as several states have taken steps to adopt, regulate, or promote digital assets in various ways.

For example, Wyoming has passed several laws to create a favorable and friendly environment for cryptocurrency businesses and investors, Texas has allowed state-chartered banks to custody and offer cryptocurrency services, and Miami has launched its own cryptocurrency and offered incentives for crypto companies and workers to relocate to the city.

The resolution is also indicative of the growing recognition and acceptance of Bitcoin as a legitimate and valuable asset class, as more and more institutional and retail investors, corporations, and governments are adopting, investing, or experimenting with the cryptocurrency.

Bitcoin, which was created in 2009 as a decentralized and peer-to-peer alternative to the traditional financial system, has become the largest and most dominant cryptocurrency in the world, with a market capitalization of over $1.2 trillion as of March 6, 2024.

Summary

The Arizona State Senate has passed a resolution that encourages the state’s retirement systems to consider investing in Bitcoin ETFs, a new type of investment vehicle that tracks the price of the leading cryptocurrency.

The resolution aims to provide the state’s retirement funds with the information and guidance needed to make informed decisions about integrating Bitcoin ETFs into their portfolios, potentially diversifying their portfolios and enhancing their returns.

The resolution also acknowledges the potential risks and challenges of investing in Bitcoin ETFs, and requires the state’s retirement systems to submit a report on their findings and recommendations to key state officials.

The resolution is now being reviewed by the House of Representatives, and if approved, it will become a concurrent resolution that expresses the opinion of the legislature.

The resolution is part of a broader trend of increasing interest and involvement of state and local governments in the cryptocurrency sector, and also indicative of the growing recognition and acceptance of Bitcoin as a legitimate and valuable asset class.

Table 1: Comparison of Bitcoin ETFs in the US

Name	Ticker	Launch Date	Assets Under Management (AUM)	Expense Ratio	Trading Volume
ProShares Bitcoin Strategy ETF	BITO	October 19, 2021	$1.8 billion	0.95%	$1.1 billion
Valkyrie Bitcoin Strategy ETF	BTF	October 22, 2021	$300 million	0.80%	$100 million
VanEck Bitcoin Strategy ETF	XBTF	November 16, 2021	$200 million	0.65%	$50 million
Invesco Bitcoin Strategy ETF	BITC	December 6, 2021	$100 million	0.65%	$20 million

References

¹: ETF.com. (2024). Bitcoin ETFs. Retrieved from ETF.com on March 6, 2024.

²: Bitcoin Magazine. (2024). Arizona State Senate Considering Adding Bitcoin ETFs to Retirement Portfolios. Retrieved from Bitcoin Magazine on March 6, 2024.

³: CoinSpeaker. (2024). Arizona Takes Steps towards Integrating Bitcoin ETFs into State Pension Funds. Retrieved from CoinSpeaker on March 6, 2024.