Bitcoin has the potential to solve current problems faced by most families seeking to send their children to higher education, including rising tuition costs, persistent inflation, and limited investment flexibility in 529 college savings plans, according to a study by the Bitcoin Policy Institute.
While current plans offer valuable tax benefits, investors are forced to deal with narrow state-selected mutual fund portfolios that underperform compared to IRAs and HSAs. According to the Bitcoin Policy Institute, these restrictions prevent households from accessing inflation-proof assets and strong long-term growth opportunities.
Bitcoin Policy Research Institute the study evaluated how modernizing 529 plans that allow Bitcoin allocations could improve returns and better protect education savings, based on the premise that Bitcoin has performed well over the long term and offered diversification benefits due to its low correlation with stocks.
Bitcoin Policy Research Institute raises BTC for 529 plan
The findings of this study show that portfolio modeling can increase compound annual returns and Sharpe ratios even with small Bitcoin allocations (1-2%), improving portfolio efficiency without significantly increasing risk.
The policy recommends issuing federal guidance and amending the tax code to allow Bitcoin in 529 plans to align with the investment flexibility of IRAs and HSAs, arguing that such a model would streamline adoption nationwide.
Another recommendation is to establish the first Bitcoin-inclusive 529 plan in Wyoming, the only state without one currently, and to encourage states to update their 529 plans by incorporating BTC and other alternative assets, expanding payment capabilities (such as ACH), and advocating for more flexible rules regarding portfolio adjustments.
The bottom line is that modernizing 529 plans through federal guidance, state innovation, or both will expand investor choice, increase portfolio resiliency, and align education savings strategies with today's financial realities.
Interest in digital assets grows at state level
The ongoing debate over BTC and 529 plans comes as momentum around retirement exposure related to cryptocurrencies continues to grow nationwide, with Americans looking forward to using their retirement savings to invest in cryptocurrencies, private equity, real estate, gold, and other non-traditional assets.
The current consensus is that the executive order clears the way for fiduciaries to offer crypto investments as an option. However, it will take time to become widely available.
In the meantime, regulators are working on new guidance to facilitate changes. A new bill in Indiana would require public retirement programs to offer Bitcoin-related investment options and limit local governments' ability to restrict the use of digital assets.
The proposal, known as House Bill 1042, submitted The bill was introduced Thursday, Dec. 4, by state Rep. Kyle Pierce, a Republican from Anderson, during a meeting of the House Financial Institutions Committee.
Its main focus is to provide public servants with access to investing in cryptocurrencies while setting clear legal boundaries regarding the use, storage, payment and mining of digital assets.
The proposal would force administrators of some state-run retirement and savings plans to include crypto exchange-traded funds as a standard investment option, allow certain public pension funds to invest directly in crypto-linked ETFs, and give state treasurers the authority to put money into stablecoin-based ETFs from certain accounts.
Pearce said the bill is intended to give Indiana residents financial flexibility and allow the state to explore the potential use of blockchain technology in government through pilot programs, while balancing investment choices and regulatory guardrails.
The bill also includes clear safeguards for self-custody and, if passed, would make Indiana the first state in the nation to require publicly managed retirement programs to offer Bitcoin exposure as a standard option.
Other states have taken similar steps, but nowhere is this more evident than in Indiana. Oklahoma passed a law last year that preserves residents' right to hold cryptocurrencies in self-custodial wallets and blocks special taxes on Bitcoin transactions.
Then this year, kentucky We did the same by formally recognizing self-custody as a protected property right. Meanwhile, Wyoming approved legislation that would allow public pension funds to invest in digital assets, and Arizona introduced legislation that would allow Bitcoin ETFs in retirement accounts.
