Public Pensions and Crypto: Indiana Weighs ETF Expansion

State Rep. Pierce Introduces Legislation to Broaden Cryptocurrency Investment Access

As digital assets continue to move from the margins of finance into the mainstream, state policymakers across the country are grappling with how — and whether — to integrate cryptocurrency into public financial systems. In Indiana, one such effort is now underway with the introduction of House Bill 1042, a sweeping proposal that aims to expand access to cryptocurrency investment options within several state-managed retirement and savings programs while also laying policy groundwork for future uses of blockchain technology.

Introduced during a recent meeting of the House Financial Institutions Committee, the bill reflects the growing reality that digital assets are no longer a niche interest but an emerging component of modern financial planning and technological innovation.

Expanding Investment Choices for Public Programs

At the core of House Bill 1042 is a provision that would require administrators of several public retirement and savings programs to offer cryptocurrency exchange-traded funds, or ETFs, as part of their regular investment options.

Unlike direct cryptocurrency ownership, ETFs allow investors to gain exposure to digital assets through regulated investment vehicles traded on traditional exchanges. Supporters argue this approach offers a more structured way to participate in the crypto market while maintaining oversight and familiar safeguards.

Programs that would be required to offer crypto ETFs include defined contribution plans for legislators, public employees, and teachers, as well as education savings vehicles such as the state’s 529 college savings plan. The goal, according to the legislation’s supporters, is to give participants more tools to diversify their portfolios in a financial landscape that is rapidly evolving.

In addition to expanding available options for individual contributors, the bill would also permit certain state pension funds to invest a portion of their assets in cryptocurrency ETFs. These include retirement systems serving public employees, teachers, judges, prosecutors, law enforcement officers, and firefighters, along with other specialized benefit funds.

A Cautious Step Into Stablecoins

Beyond traditional cryptocurrency ETFs, House Bill 1042 also addresses stablecoins — digital assets designed to maintain a consistent value by being pegged to traditional currencies or reserves.

Under the proposal, the state treasurer would be authorized to invest assets from a limited set of designated funds into stablecoin-based ETFs. These funds include the Trust Indiana Investment Pool, the Next Generation Trust Fund, and the State Police Benefit System.

By limiting stablecoin investments to ETFs rather than direct holdings, the bill attempts to strike a careful balance: acknowledging growing interest in digital currencies while avoiding the volatility typically associated with the broader crypto market.

Strengthening Policy Around Digital Assets

House Bill 1042 is not limited to investment provisions. It also includes a series of policy directives aimed at providing clarity and consistency around digital asset usage across the state.

One section of the bill would prohibit public agencies, counties, municipalities, and townships from adopting or enforcing rules that unfairly restrict the use of digital assets when similar traditional financial activities are allowed. That includes accepting cryptocurrency as payment for legal goods and services, maintaining custody of digital assets using self-hosted or hardware wallets, and participating in blockchain-related business activities.

The legislation also addresses digital asset mining, specifying that mining operations located in properly zoned industrial areas cannot be singled out with restrictions — such as excessive noise rules — that do not apply to comparable industrial businesses. Similarly, private mining conducted in residential areas would be treated like other household activities, subject to the same noise standards as neighboring residences.

Another notable provision clarifies that the development or use of noncustodial digital asset software does not constitute money transmission for licensing purposes, reducing regulatory uncertainty for developers and innovators working with blockchain technology.

Protecting Privacy and Due Process

The bill also touches on digital privacy, an issue that has become increasingly important as financial assets move into encrypted and decentralized formats. Under House Bill 1042, a court could compel disclosure of a private digital asset key only if no other admissible information is sufficient to gain access to the asset in question.

This provision seeks to preserve due process protections while recognizing the unique nature of privately held digital keys, which often grant exclusive control over assets stored on a blockchain.

Looking Ahead: Studying Blockchain’s Broader Potential

Recognizing that cryptocurrency investments represent only one piece of a much larger technological shift, the legislation would establish a Blockchain and Digital Assets Task Force.

The task force would be charged with evaluating potential governmental use cases for blockchain technology, examining consumer protection issues, assessing tax administration implications, and reviewing investment governance standards related to digital assets. It would also be responsible for developing recommended legislation ahead of the 2027 legislative session, including proposals for up to two state or local blockchain pilot projects.

These pilot projects would be designed to test how blockchain technology could be implemented within Indiana’s public sector, offering lawmakers real-world data before making broader policy decisions.

Where the Bill Stands Now

House Bill 1042 received its first reading on December 2, 2025, and has been referred to the House Committee on Financial Institutions. As the bill moves through the legislative process, it is expected to spark discussion not only about cryptocurrency investments, but also about how states can responsibly adapt to financial technologies that are reshaping the global economy.

While the debate over digital assets is far from settled nationwide, Indiana’s proposal highlights a growing trend among states: preparing public systems for a future where blockchain technology and digital finance play a larger — and potentially transformative — role.