State Treasurer Brad Briner would be able to invest as much as five percent of North Carolina's state retirement funds in digital assets like cryptocurrencies under a bill the N.C. House of Representatives approved Wednesday.
House Bill 92 as much as five percent of any one of the state's retirement funds in digital assets like cryptocurrencies, nonfungible tokens or stablecoins.
"What this does is allow the state treasurer to do his job. It doesn't direct him to invest in anything, but it simply opens up one more asset class that the state can take advantage of to ensure the long-term fiscal health," said Mike Schietzelt, a Wake County Republican. Schietzelt is the bill's primary sponsor.
Some Democrats argued on the House floor that crypto is a risky investment strategy and could leave state employees' retirement funds vulnerable to theft.
An earlier version of House Bill 92 capped investment in crypto at 10% of the total funds. The version on the House floor Wednesday slashed that in half.
Rep. Tracy Clark, a Greensboro Democrat, argued that investing in crypto would effectively represent gambling with state employees' retirement funds. Under the legislation, Clark said, the state treasurer could purchase a non-fungible token with as much as $6.35 of the state's retirement funds.
"If you want to invest your own hard-earned $13,000 legislator salary in crypto, go for it, but do not do it with North Carolina taxpayer dollars. Remember your role as a fiduciary to your constituents," Clark said.
During Wednesday's debate, Rep. Marcia Morey, a Democrat from Durham, held up a printed out photo of the Bored Ape NFT that Justin Bieber bought with coins valued at about $1.3 million. That asset quickly , a point Morey used to demonstrate the risk of investing in digital assets.
"I would trust a sophisticated investor, a sophisticated person, like Treasurer Briner not to invest in this and, in fact, to establish procedures, rules, policies for future treasurers to follow with regard to this. And I don't know that there's anybody I trust more to set those policies," Schietzelt said.
During an April hearing before the House Oversight Committee, Briner said crypto could be valuable if inflation causes the value of the United States dollar to fall. But, Briner said, the volatility of crypto and especially bitcoin are "much, much higher" than he'd like to see the state pension plan invest in.
"There probably is a role for them over time in a very modest proportion, but I'm not sure what that role is at the immediate moment," Briner told the committee.
Briner also said that it's important for the Treasurer's Department to be able to use blockchain technology to secure assets because the financial industry is swiftly headed in that direction.
House Bill 92 also requires the state treasurer to work with a third-party consultant to obtain an assessment about whether the digital asset is obtained with a secure custody solution, how it fits with the fund's investment portfolio and that it meets risk and compliance standards.
Rep. Curtis Loftin, a Charlotte Democrat, warned Republican lawmakers that their trust in Briner shouldn't be the reason for such a change in the state's investment strategy.
"When we make laws, we don't make it based on who happens to occupy an office at a particular time or who happens to be the Treasurer at this moment. We're making laws that are supposed to apply regardless of who is in the office," Loftin said.
Other changes for the Treasurer
Under the legislation approved Wednesday, Briner or subsequent treasurers could explore the possibility of letting state employees invest supplemental retirement funds in digital assets.
It also directs Briner to work with the N.C. State Bureau of Investigation and other law enforcement agencies to explore a reserve to hold digital assets seized by or forfeited to the state. Part of that includes trying to figure out the best time to sell seized digital assets so revenue can be sent to the state's Civil Penalty and Forfeiture Fund.
A separate bill the House approved this week would overhaul who is in charge of investing the state's retirement funds.
Right now, final investment decisions rest solely with the state treasurer. Briner has requested legislation that would allow him to share that power, which was written into House Bill 506.
That legislation would create a five-member board known as the North Carolina Investment Authority to approve investment decisions. The new board would include Briner, an appointee he selects and one appointee each from the governor, Senate president pro tempore and Speaker of the House.
Both bills have been sent to the Senate, which would need to approve them before they could be considered by Gov. Josh Stein.
The Senate's proposed budget, which has been sent to the House, the treasurer the permission to invest state retirement funds in digital assets, as well as a provision creating the investment authority.
