Arizona Governor Katie Hobbs Vetoes Bitcoin Pension Plan

An effort to bring crypto into Arizona's public pension system has hit a wall after Governor Katie Hobbs vetoed legislation that would have allowed the state to invest retirement savings in digital assets like Bitcoin.

Governor Katie Hobbs has vetoed legislation that would have permitted the state of Arizona to invest in digital assets, such as Bitcoin, for public pensions.

The initiative, which began with bipartisan support in both chambers of the state legislature, faced a setback as Governor Hobbs rejected the proposal to include cryptocurrencies in the Arizona State Retirement System's investment portfolio.

Senate Bill 1025, which had passed the state assembly and was sent to the governor's desk last week, aimed to diversify the system's portfolio and potentially help hedge against inflation by introducing assets like Bitcoin and Ethereum.

However, Governor Hobbs expressed concerns about the risk posed by volatile and largely uncharted assets for public pensions, leading her to veto the bill.

In her veto letter, Governor Hobbs highlighted the importance of maintaining stability in one of the nation's strongest retirement systems, warning that crypto markets are "untested" and unsuitable for safeguarding public funds.

"I am returning Senate Bill 1025, which would authorize the state to invest in cryptocurrency in the Arizona State Retirement System, without my approval," Governor Hobbs wrote in her letter to the State Legislature.

"This bill would allow up to 10 percent of the system's portfolio to be invested in cryptocurrencies, despite the volatility and lack of regulation in these markets."

She added: "This measure poses an unacceptable risk to the retirement savings of public employees and would be a serious misallocation of state resources."

The governor's decision effectively halts what could have been the first state-run Bitcoin reserve in the U.S. While other states, such as Wyoming and South Dakota, have entertained similar legislation, none have yet managed to introduce digital assets into their public finance frameworks.

A companion proposal, SB1373, which would permit up to 10 percent of Arizona's rainy-day funds to be held in crypto, is still pending a final decision.

For now, the broader trend of cautious state-level resistance to crypto integration continues, with officials weighing the potential benefits of diversification against the substantial risks associated with the nascent technology.