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Andreas Park, professor of finance at the University of Toronto’s Rotman School of Management, cautions that individuals who are willing to accept cryptocurrency-based pension payouts need to understand how the pension system works. “When you think of pension payments, a pension basically is there to sustain your lifestyle after you retire, . . . so . . . if I receive a particular token . . . as a form of payment, I need to either use it directly or I need to be able to convert it into something that is commonly used, which is money.”
Notably, the survey also found two-fifths (40 per cent) of younger respondents said they’ve already invested in cryptocurrencies, demonstrating a strong interest in digital assets. While some may view cryptocurrencies as a risky investment, Park notes there are already many assets that are included in pension funds’ allocations that have experienced volatility in the markets. The role of a pension manager is to preserve wealth and grow the fund, he says, noting investing in cash isn’t always the best preservation of capital due to inflation and stocks can fluctuate in price.
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“We saw that . . . with Nvidia. . . . The possibility of a crash in tech stocks is big. And if you look at the companies that have been around in the early 1980s within the major [indices], I don’t think you find very many are left. . . .You don’t look at any asset in isolation. . . . You look at assets as part of a pool.”
Bitcoin accounts for currently one per cent or less of the investable assets that exist in the world, he adds, noting, in theory, cryptocurrencies may be a useful addition to a well-diversified portfolio. That being said, Bitcoin can go to zero tomorrow, he says, noting it’s possible that it wouldn’t recover. By contrast, a stock like Apple Inc. could fall to zero tomorrow but all of its assets will still have some value. “If Bitcoin goes to zero tomorrow, there’s nothing left.”
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