Treasury and Investment Management Committee Update.

• Author: Carter, Genevieve
• Position: COMMITTEE UPDATE

Over the past two years, the Treasury and Investment Committee has discussed numerous issues related to state and local governments' accepting, using, and investing in cryptocurrency. One result of these discussions is two best practices, Payments Made by Governments and Receivables and Handling Receivables in the Treasury Office, which tell governments not to use cryptocurrency.

To further this point, earlier this year the committee developed an advisory specific to cryptocurrency, which the GFOA's Executive Board approved at its March meeting. The document, Abstain from Using and Investing in Cryptocurrency for Government Operations, advises governments not to accept cryptocurrency for receivables, use cryptocurrency for payables, or invest in these products because cryptocurrency carries multiple risks--including the following:

* It is not legal tender.

* The product and sector are unregulated.

* It lacks an underlying substantive value, and therefore its value can't be assessed.

* It is extremely volatile in nature.

* It is potentially illiquid.

* State laws likely do not consider it a permissible investment [nor should it be],

* Banks cannot process the product.

These products have other risks, too, including substantial risks of loss through investing and converting to dollars.

Cryptocurrency isn't regulated, and at this time no one can determine which regulatory body would have jurisdiction. GFOA is monitoring the efforts of regulators--including the Federal Reserve, Securities and Exchange Commission, the Commodity Futures Trading Commission, and Congress--for any actions that would alter our assessment of this sector.

The committee is committed to discussing developments at its biannual meetings and is working with the GFOA's Federal Liaison Center on any federal government actions of interest. The committee is also developing a resource list for governments to help them better understand the risks and volatility of this sector. TIM Committee Chair Cory Kampf gave a presentation to the Association of Governmental Accountants in July 2022 about the advisory and GFOA's concerns of using cryptocurrency in the public sector; his presentation is available as a resource to the advisory at gfoa.org/materials/ cryptocurrency-advisory.

Also on the committee's work plan is creating additional resources to correspond with several best practices. One of these documents will help governments get started with or review current...