California’s largest public pension systems, CalPERS and CalSTRS, have invested hundreds of millions in crypto-related equities without directly buying bitcoin or other cryptocurrencies. These holdings, mainly in companies like Coinbase and Strategy, represent a tiny fraction of their portfolios but raise concerns about undisclosed risks to taxpayer-backed funds. The investments have declined in value amid bitcoin’s price drop.
California’s Public Employees’ Retirement System (CalPERS) and State Teachers’ Retirement System (CalSTRS) manage nearly $900 billion in assets. Despite not purchasing bitcoin or cryptocurrencies directly, these funds disclosed holdings in crypto-linked public companies, including Coinbase and Strategy, formerly known as MicroStrategy. At bitcoin’s market peak last year, the investments were valued over $500 million, but they now stand below $300 million, reflecting bitcoin’s fall from over $126,000 in October to under $67,000 at the start of March.
Coinbase operates as a publicly traded cryptocurrency exchange, generating revenue from trading and custody services, with its valuation tied to crypto market performance. Strategy, classified as a software firm, has become a bitcoin holding vehicle, using debt and equity to finance large purchases, making its stock a leveraged proxy for bitcoin exposure. Strategy’s shares traded above $450 last year but dropped below $130 last week.
The crypto-linked equities make up about 0.03% of the portfolios, a small share, but the integration of such volatile assets into taxpayer-backed plans is notable. Public pension systems acquire these investments routinely through public equity strategies, without needing new laws. Additional exposure comes via venture capital and private equity funds investing in digital-asset companies, often reported simply as equities, obscuring risks from stakeholders.
This trend extends beyond California, with other U.S. pension funds accumulating billions in crypto exposure through index funds and exchange-traded products. Pension benefits for public workers are guaranteed, so underperformance shifts costs to taxpayers via higher contributions, tax increases, or service cuts. At the end of fiscal year 2024, CalPERS and CalSTRS reported $205 billion in unfunded liabilities; including local systems, the total reaches nearly $270 billion.
CalPERS, the nation’s largest public pension system, holds a negligible but potentially growing crypto exposure. Mariana Trujillo, managing director of government finance at Reason Foundation, recommends separate disclosure of crypto risks in asset-allocation reports, rather than burying them in broad equity categories. She advocates for small, fully disclosed allocations with strict custody, stress testing, and exit strategies to safeguard taxpayers.
