Pensions and cryptocurrencies: an unexpected alliance

josevas217 (80)in PussFi 🐈 • 2 days ago

Hello PussFi Friends, good day everyone. Today I wanted to share something that's been on my mind after some reading I've done about pensions, regulations, and cryptocurrencies, and how perhaps combining these things can bring some innovation and growth, if done carefully.

I was reading that Trump recently signed an executive order to allow 401(k)-type retirement plans in the United States to invest in cryptocurrencies, private real estate, and other alternative assets. That means the SEC and the Department of Labor are being asked to review old regulations that limited such investments in order to clear the way for retirement plans to diversify beyond bonds, traditional stocks or cash.

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Now, why do I think this is so significant, and why do I think a small percentage of pensions invested in crypto could be a big deal? First, US retirement plans handle huge amounts. For example, 401(k)s alone hold around US$8.9 trillion in assets, according to recent data.^SourceAnd that's just considering defined contribution plans; if we add defined benefit plans and all public and private pension funds, we're talking tens of trillions more. .^Source

If just a fraction of those funds—say 0.5% or 1%—are allocated to crypto or regulated crypto-based instruments (e.g., Bitcoin or Ethereum ETFs, or well-structured derivatives), this could generate an interesting effect: diversification, exposure to a new type of asset that has historically performed uncorrelatedly with the traditional market, and the possibility of high returns (albeit with greater risks). But be careful, this isn't about dumping the entire fund into crypto, but rather incorporating a small, well-thought-out percentage with clear oversight and regulation.

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Furthermore, allowing this type of investment could push the crypto market to mature more quickly. If regulators need to define clearer rules for 401(k)s and other funds to use crypto, then transparency, custody, auditing standards, and risk controls would improve. All of this would help this ecosystem stop being seen as marginal or very risky and become a more accepted part of institutional portfolios.

Another point that seems key to me is that this could benefit those who are closer to retirement: younger generations could see better returns—as long as risk is managed well—and that could help close savings gaps. But also, for those already close to retirement, a small portion of the portfolio could be considered high-risk, with well-defined limits.

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Obviously, there are challenges: the volatility of cryptoassets is not a game; regulatory and even fraud risks exist; liquidity can be an issue; we need to see how this is integrated into the fiduciary requirements of those who manage these funds, so that they protect the interests of savers. But I also believe that the policy change Trump is proposing—giving the green light to explore this avenue—is a step forward for pension funds to adapt to financial innovation, rather than being left behind.

As I sign off, what motivates me most about all this is seeing that something as significant as pension funds (which is no small feat) could serve not only to meet past obligations but also to take advantage of future opportunities. That the money saved for retirement can be part of something that grows, diversifies, and adapts. That it's not just a "save and wait" approach, but a "grow with vision" approach. I say goodbye, hoping that you are all very well, friends, and that these ideas give you something to think about how you can also personally diversify your “own pensions” (be it time, energy, projects) so as not to depend only on what is already given, don't you think?