According to research from the Bitcoin Policy Institute, Bitcoin has the potential to resolve current issues faced by families saving for higher education, including rising tuition costs, persistent inflation, and limited investment flexibility in 529 college savings plans.
While current 529 plans offer valuable tax advantages, they restrict investors to narrow, state-selected mutual fund portfolios that often underperform relative to IRAs and HSAs. The Bitcoin Policy Institute suggests these limitations prevent households from accessing inflation-resistant assets and stronger long-term growth opportunities.
The Bitcoin Policy Institute's research has evaluated how modernizing 529 plans to permit Bitcoin allocations could improve returns and better safeguard education savings. This analysis is based on Bitcoin's history of delivering strong long-term performance and offering diversification benefits due to its low correlation with equities.
Bitcoin Policy Institute Advocates for BTC in 529 Plans
The findings indicate that portfolio modeling shows even small allocations of Bitcoin, ranging from 1% to 2%, can increase compound annual returns and Sharpe ratios, thereby boosting portfolio efficiency without materially increasing risk.
The policy recommends the issuance of federal guidance or an amendment to the tax code to allow Bitcoin in 529 plans. This change would align them with the investment flexibility of IRAs and HSAs, and the institute claims such a model would streamline nationwide adoption.
Another recommendation is to establish the first Bitcoin-inclusive 529 plan in Wyoming, which is the only state currently without a 529 plan. The institute also encourages states to update their 529 offerings by incorporating BTC and other alternative assets, expanding payment capabilities like ACH, and advocating for more flexible rules on portfolio adjustments.
Ultimately, modernizing 529 plans, whether through federal guidance, state innovation, or a combination of both, would expand investor choice, increase portfolio resilience, and align education savings strategies with contemporary financial realities.
Growing Interest in Digital Assets at the State Level
The discussion surrounding Bitcoin and 529 plans is occurring amidst growing momentum for crypto-linked retirement exposure nationwide. Citizens in the United States are increasingly looking to use their retirement savings to invest in cryptocurrencies, private equity, property, gold, and other non-traditional assets.
Currently, the consensus is that a presidential executive order has cleared the way for fiduciaries to offer crypto investments as an option. However, widespread availability is expected to take some time to be fully implemented.
In the interim, regulatory bodies are actively working on new guidance to facilitate these changes. In Indiana, a newly introduced bill would require public retirement programs to offer Bitcoin-related investment options and also limit the power of local governments to restrict the use of digital assets.
This proposal, known as House Bill 1042, was filed on Thursday, December 4, by State Representative Kyle Pierce, a Republican from Anderson. It was presented during a meeting of the House Financial Institutions Committee.
The bill's primary focus is on providing public workers access to cryptocurrency investments while establishing clear legal boundaries around digital asset use, custody, payments, and mining.
In addition to requiring administrators of several state-run retirement and savings plans to include cryptocurrency exchange-traded funds as standard investment choices, the proposal would also permit certain public pension funds to invest directly in crypto-linked ETFs. It would also grant the state treasurer the authority to place funds from specific accounts into stablecoin-based ETFs.
According to Representative Pierce, the bill is designed to offer Indiana residents greater financial flexibility. It aims to balance investment choice with regulatory guardrails while also allowing the state to explore potential government use of blockchain technology through pilot programs.
The bill also incorporates clear safeguards for self-custody. If enacted, it would make Indiana the first state in the country to mandate that publicly managed retirement programs offer Bitcoin exposure as a standard option.
Other states have implemented similar measures, though none as direct as Indiana's proposal. Last year, Oklahoma passed a law that preserves residents' right to hold cryptocurrency in self-custody wallets and prohibits special taxes on Bitcoin transactions.
This year, Kentucky formally recognized self-custody as a protected property right. Meanwhile, Wyoming approved laws allowing public pension funds to invest in digital assets, and Arizona introduced legislation that would permit Bitcoin ETFs in retirement accounts.