Proposal for a Bitcoin Strategic Reserve and Endowment Fund for the UC System and UCLA

Executive Summary

The University of California (UC) system – and UCLA in particular – have a strategic opportunity to leverage Bitcoin as part of their financial strategy. This proposal outlines the establishment of two related initiatives: a Bitcoin Strategic Reserve (held in UC/UCLA treasury assets) and a Bitcoin Endowment Fund (a dedicated fund within the endowment, potentially donor-funded). The objectives are to bolster financial resilience and growth (as an inflation hedge and portfolio diversifier), demonstrate innovation leadership in higher education, and engage donors/alumni in new ways. Recent developments lend credibility to this strategy: major universities like Emory, Brown, and Harvard have begun investing in Bitcoin via exchange-traded funds (ETFs) , and policy shifts (e.g. U.S. accounting clarity and a federal Strategic Bitcoin Reserve) have reduced institutional barriers .

Under this proposal, UC/UCLA would implement a phased, risk-managed approach. A small percentage of treasury reserves would be converted to Bitcoin in a strategic reserve, held for the long term to preserve value and hedge against monetary inflation . Simultaneously, a Bitcoin-denominated endowment sub-fund would be established – seeded by donor contributions or a reallocation of a modest portion of existing endowment – to capitalize on Bitcoin’s growth potential and attract new philanthropy. Robust governance and custody controls (multi-signature wallets, regulated custodians, etc.) will be put in place to secure assets and prevent misuse. A comprehensive risk analysis is provided, addressing price volatility, regulatory uncertainties, cybersecurity, and reputational considerations, with mitigation strategies for each. Implementation will be carefully staged: initial pilots and acquisitions will be small-scale (well within prudent limits ) and gradually scaled as confidence and oversight frameworks mature. The proposal also benchmarks peer institutions and addresses the specific concerns of UCLA campus leadership and the UC Board of Regents, tailoring the rationale to each.

In summary, establishing a Bitcoin Strategic Reserve and Endowment Fund could strengthen UC’s financial position and future-readiness. If executed prudently, this dual approach stands to diversify UC’s assets, protect against inflation, enhance the university’s reputation as an innovator, and engage a new generation of donors – all while aligning with the academic mission of exploring cutting-edge technologies. The sections below detail the objectives, models, legal/regulatory factors, governance design, risk management, implementation roadmap, ethical and reputational factors, peer benchmarks, and targeted recommendations for UCLA and UC Regents.

Objectives for a UC/UCLA Bitcoin Initiative

1. Inflation Hedge and Store of Value:  Bitcoin is often likened to “digital gold” due to its finite supply of 21 million coins and resilient security . With global money supplies expanding dramatically in recent years, many investors have turned to assets like gold and Bitcoin as stores of value amid inflation fears . Holding a portion of reserves in Bitcoin could help preserve the purchasing power of UC’s capital over the long term. Unlike fiat currency cash holdings that erode with inflation, Bitcoin’s built-in scarcity provides a potential hedge against fiat dilution and currency debasement . By being among the first public universities to establish a strategic Bitcoin holding, UC would emulate recent steps by governments (e.g. the U.S. now retains seized Bitcoin as a strategic reserve asset instead of selling it ) and cities (Vancouver has even explored holding Bitcoin in its treasury as an inflation hedge ). This objective aligns with UC’s fiduciary duty to preserve capital value for future needs.

2. Portfolio Diversification and Enhanced Returns:  From an investment perspective, Bitcoin offers a low-correlation asset that can diversify the university’s portfolio of stocks, bonds, real estate, and private equity. UC’s General Endowment Pool already includes a broad range of asset classes to balance risk and return ; a modest Bitcoin allocation could further improve risk-adjusted returns. Historically, Bitcoin has been the best-performing asset of the past decade, albeit with high volatility . Even in 2025, Bitcoin’s year-to-date return (~25% by mid-year) has outpaced the S&P 500 (~6.5%) . While past performance is no guarantee of future results, modern portfolio theory suggests that a small allocation to asymmetrically high-return assets can increase a portfolio’s long-term growth without intolerably increasing overall risk. The potential upside of Bitcoin (as evidenced by its climb to new record highs above $120k in 2025 ) could significantly boost endowment gains if the asset continues to appreciate. At the same time, because Bitcoin’s market drivers differ from traditional assets, it can provide diversification benefits – possibly performing well in scenarios where stocks or bonds underperform. This diversified approach mirrors steps taken by peer endowments: Emory’s $11B endowment added a Bitcoin fund position to “balance the market risk associated with any investment” , and Harvard’s endowment shifted into gold and Bitcoin ETFs as a hedge amidst stock volatility .

3. Innovation and Thought Leadership:  Embracing Bitcoin would position UCLA and UC as pioneers in the academic sector, demonstrating innovation leadership in finance and technology. Few universities have taken this step, so UC would be sending a bold message that it is forward-thinking and unafraid to explore emerging paradigms. This can enhance the university’s reputation in the eyes of students, faculty, industry partners, and the public. The move would resonate especially with California’s identity as a global technology hub. It also aligns with the UC mission of fostering innovation: integrating Bitcoin into financial strategy provides a live case study for research and learning. The University of Austin, for example, framed its new Bitcoin endowment as “a statement of shared values and a commitment to innovative thinking,” reflecting a forward-thinking approach to education and finance . Likewise, University of the People’s President noted that “as the university of the future, it makes perfect sense for us to create our endowment in the currency of the future”, linking their cryptocurrency endowment initiative directly to an innovation ethos . By acting as an early adopter, UCLA can similarly brand itself at the forefront of financial innovation in higher education. This leadership can attract top faculty and students interested in cryptocurrency and fintech, and open doors to collaborations (e.g. fintech companies might partner with a crypto-progressive university on research or recruiting). In an era when universities are increasingly competing on innovation, this initiative would signal that UCLA and UC are “embracing unorthodox ideas” and “demonstrating a forward-thinking approach” to institutional management .

4. Donor and Alumni Engagement:  A Bitcoin endowment fund would offer a new avenue to engage donors, particularly younger alumni and those in the tech sector who have accumulated wealth in cryptocurrency. Many such donors are passionate about crypto’s philosophy and might be more inclined to give if they know the university will hold their gift in Bitcoin rather than immediately liquidating it. Notably, donations of cryptocurrency are tax-advantaged in the U.S.: donors can transfer appreciated crypto to a nonprofit without incurring capital gains tax, and the university (as a tax-exempt entity) also pays no tax when it eventually sells, meaning more of the gift’s value supports the institution . This win-win tax treatment has led to a surge in crypto philanthropy – Fidelity Charitable reported a 12x increase in crypto donations from 2020 to 2021 . UC can tap into this trend by actively inviting Bitcoin or other crypto gifts to the endowment. By establishing a dedicated Bitcoin Endowment Fund, UCLA could attract significant new gifts that might not otherwise come in as fiat donations. The fund’s existence itself can be a marketing tool: it signals that the university is capable of stewarding such gifts in their original form. We see precedent in other institutions: the University of Austin’s Bitcoin endowment was kickstarted by a personal donation of 2 BTC from a tech CEO , and University of the People received an initial $1 million crypto gift to seed its crypto endowment . In addition to large benefactors, a crypto endowment allows grassroots alumni participation – e.g. alumni who are crypto investors could contribute small amounts of Bitcoin to this fund as part of crowd-sourced campaigns, knowing their contributions will remain in crypto and potentially grow. Beyond fundraising, this initiative creates opportunities for engagement through events, newsletters, and communities centered on the intersection of UCLA and blockchain innovation. Donors and alumni with expertise in cryptocurrency could be invited to serve on advisory boards or to speak on campus, strengthening their connection to the university. Overall, the Bitcoin fund can galvanize a segment of the donor base that values futurism and alternative investments, providing UCLA with new champions and resources.

5. (Secondary Objectives) – Academic Synergies: The initiative can directly support UCLA’s academic mission by providing real-world data and experiences for research in finance, economics, and technology fields. It could fund scholarships or research centers in blockchain technology from its returns (see Academic Alignment section). Visibility and Branding: UC would gain positive media coverage as a large public university breaking new ground – akin to how Emory’s disclosure of a Bitcoin stake made national news as a milestone . This attention can be managed to highlight UC’s proactive risk management and vision. Strategic Opportunity: UC’s action would ensure it is not “left behind” if Bitcoin’s potential continues to materialize – echoing the sentiment of the Rockefeller Foundation’s CIO, who said they “don’t want to be left behind when [crypto’s] potential materializes dramatically” . In essence, while careful stewardship is paramount, UC stands to gain early-mover advantages by thoughtfully integrating Bitcoin into its financial strategy.

Proposed Models for Bitcoin Integration

We propose three models – not mutually exclusive – by which UC and UCLA can incorporate Bitcoin. These are: (A) a Bitcoin Strategic Reserve held in treasury, (B) a Bitcoin Endowment Fund, and (C) a Hybrid structure combining elements of both. Each model has distinct purposes and implementation considerations, summarized in Table 1 below and detailed thereafter.

Aspect	Model A: Bitcoin Strategic Reserve	Model B: Bitcoin Endowment Fund	Model C: Hybrid Structure
Purpose & Objectives	Treasury reserve asset to hedge inflation, diversify cash reserves, and strengthen balance sheet stability . Treated similar to gold or oil reserves – a long-term store of value not meant for routine spending.	Endowment investment aimed at long-term growth and supporting the university’s mission (research, scholarships) via future appreciation. Also serves to engage donors in a cutting-edge fund .	Dual-purpose fund that serves as both a reserve and an endowment. A portion is ring-fenced as untouchable reserve principal, while earnings or a set payout can fund university initiatives (like an endowment’s annual spend). Combines financial hedge with direct support for academic programs.
Source of Funding	University internal funds (e.g. portion of UC’s working capital or UCLA’s reserves). Could reallocate a small % of cash or short-term investments into BTC. No donor funding needed, though could include one-time budget allocation approved by Regents.	Primarily donor contributions of Bitcoin or cash (to be converted to BTC). Could also allocate a fraction of the existing endowment to seed it. Donor intent is crucial – gifts would be solicited specifically for this fund and kept in crypto form .	Combination of sources: University treasury contributes seed capital (showing institutional commitment) and donors match or add to it. For example, UCLA might invest $5M from reserves and invite $5M from donors, pooling into one Bitcoin fund. This mix spreads risk and aligns stakeholder interests.
Governance & Oversight	Managed by UC’s investment/treasury team under Regents’ oversight. Conservative mandate: buy and hold with minimal trading. Decisions (e.g. buying more or only rebalancing) require high-level approval (Regents/CFO). Custody via secure institutional channels (see Governance section). Likened to central bank reserves in approach .	Managed by UCLA’s endowment office or Foundation, with guidance from investment committee and possibly a special advisory board of crypto-savvy alumni/donors. Follows endowment policies (e.g. spending rule, typically ~4-5% annual payout, could be in BTC or converted to USD as needed). Honor donor intent to hold Bitcoin long-term . Key decisions (asset allocation, liquidation) involve both finance staff and donor representatives (in advisory role) to maintain trust.	Joint governance structure: a steering committee with representation from UC Regents (or UC Investments Office) and UCLA Foundation, plus perhaps external experts. This committee sets policy for the fund’s reserve portion (which should not be spent or only in emergencies) and endowment portion (which could follow a payout rule). Ensures neither aspect is neglected. Requires coordination between system-wide and campus authorities for decision-making.
Custody & Security	Likely use a third-party institutional custodian (approved by UC) for secure cold storage of the reserve BTC, similar to how sovereign entities custody gold. Multi-signature arrangements with multiple approvers (e.g. UC CFO, UCLA CFO, custodian) to move funds . Emphasis on not losing keys – minimal transaction frequency.	Custody could be via a reputable exchange custody service or a collaborative custody provider (e.g. Unchained, which provided a multi-signature vault for UATX’s endowment ). Multi-sig can include university and trustee keys, ensuring no single party can unilaterally withdraw. Smart contract features (if using tokenized BTC or escrow arrangements) could automate compliance with spending rules (e.g. time-locks to enforce a five-year hold before any distribution) – though direct Bitcoin multi-sig is more straightforward.	A hybrid custody approach can be adopted: for example, 50% of the BTC held in deep cold storage as true reserve (harder to access, higher threshold of approvals), and 50% in a slightly more liquid custody setup to facilitate endowment distributions. Multi-signature keys distributed among UC, UCLA, and custodial partners for checks and balances. Regular audits and state-of-the-art security for all holdings.
Pros/Advantages	– Enhances financial resilience of UC with a non-fiat reserve .- Simple strategy (buy/hold) with low management overhead.- Could appreciate significantly, bolstering UC’s balance sheet and capacity to fund future projects. – Sends strong message of confidence in innovation (PR boost as first public U.S. university with Bitcoin reserves).	– High growth potential to boost endowment value and support more scholarships, research, etc. if BTC appreciates.- Attracts new donations and positive publicity among tech communities .- Aligns with donor intent for cutting-edge giving; builds a community of crypto-minded supporters around UCLA.- Functions as a living lab for students/faculty interested in fintech (educational value).	– Balanced approach: marries the stability goals of a reserve with the growth goals of an endowment.- University shows commitment (by investing its own funds) which can encourage donors to give, leveraging resources.- Reserve portion provides backstop in case of extreme economic downturn (a hard asset to draw on only if needed), while endowment portion yields regular benefits to campus.- Shared governance can foster system-campus collaboration; success would benefit both UCLA and the broader UC system.
Cons/Risks	– Bitcoin’s volatility could impair reserve value in the short-medium term (not ideal for funds that might be needed on short notice). A severe price drop could temporarily weaken UC’s reserve position .- Holding crypto on a public entity’s balance sheet may invite scrutiny (political or public concern about risk or philosophical objections).- Liquidity trade-off: funds tied in BTC are not in treasuries or bonds, which are more stable; UC must be confident it won’t need this slice of funds urgently during a dip.	– High volatility means endowment market value could swing wildly year to year, complicating planning (e.g. a 80% drawdown would reduce payout ability).- Fiduciary concerns: stakeholders must be convinced that this is a prudent investment and not “gambling” with donor funds .- If not managed well, could become a distraction or be criticized if returns underperform traditional assets. Donors might be upset if their crypto gifts lose value post-donation.- Requires specialized custody and oversight knowledge in the endowment team (new operational complexity).	– More complex governance: coordinating between UCLA and UC Regents can be bureaucratic. Decision-making must satisfy both campus needs and system risk tolerance.- Accounting and allocation could be tricky: determining what portion is truly reserve vs. endowment, and tracking usage accordingly.- Still subject to crypto’s general risks (volatility, regulatory changes) on both components – essentially carries both sets of risks, though mitigated by divided purpose.- Could dilute the clarity of intent: stakeholders might prefer a pure approach (either keep as untouchable reserve or fully use for growth) rather than a hybrid.

Table 1: Comparison of three models for UC/UCLA Bitcoin integration. Each model can stand alone or be combined with others. A phased approach may start with one model and expand to others as experience grows.

A. Model A – Bitcoin Strategic Reserve (Treasury Asset)

In this model, the University establishes a Bitcoin Strategic Reserve analogous to a sovereign wealth reserve or a corporate treasury allocation. UC (or UCLA) would designate a portion of its treasury holdings – e.g. cash reserves, short-term investments, or rainy-day funds – to be held in Bitcoin. The reserve would be a long-term, non-liquid asset on the balance sheet, not relied upon for routine operational spending (much like an emergency fund).

Objectives & Rationale: The primary goal is capital preservation and inflation hedging over the long horizon. Rather than sitting entirely in dollars (which can lose real value over time), a slice of reserves in Bitcoin provides an asset that cannot be diluted by monetary policy . This is especially relevant given UC’s perpetual nature – the university plans for decades and centuries, and over such periods inflation and currency debasement are significant concerns. A strategic Bitcoin reserve is meant to hold value or appreciate when fiat currencies weaken. For example, Bitcoin’s programmatic scarcity and growing adoption have led some governments to retain it as a strategic asset instead of selling it . UC would similarly benefit if Bitcoin continues its historical appreciation trend. Additionally, the reserve diversifies UC’s safe-haven assets. UC already holds other assets (bonds, etc.) for stability; Bitcoin could join as a “neutral, trust-based alternative” store of value that isn’t tied to any single government’s credit .

Scale: The allocation should be modest relative to total reserves, to respect risk. Many experts suggest something like 1-5% of liquid reserves as an upper bound for such an experimental asset, at least initially . For context, MicroStrategy (a company) famously put a majority of its corporate treasury into Bitcoin, but more relevant to UC, the State of Wisconsin’s public pension fund invested on the order of 0.3-0.5% of its assets into Bitcoin ETFs , and similar small allocations have been discussed by other public funds. UC could consider, for example, 1% of its Short Term Investment Pool (STIP) or Total Return Investment Pool (TRIP) converted to Bitcoin. This would be a manageable exposure that wouldn’t threaten overall liquidity. The goal is to start small, prove out processes, and only increase allocation if justified by results and oversight comfort.

Governance: The Bitcoin reserve would be overseen by UC’s existing financial governance structure (the Regents’ Committee on Investments and the UC Chief Investment Officer (UC Investments) team). Policy guidelines specific to the Bitcoin reserve should be established. For instance, the policy might state that the Bitcoin reserve is a non-spendable asset except in extreme circumstances, mirroring how President Trump’s 2025 Executive Order mandated that U.S. strategic Bitcoin reserves “shall not be sold” and are to be maintained as reserve assets . Such a statement of intent insulates the holdings from short-term political or budget pressures and reinforces the long-term thesis. The policy could also cap the reserve’s size as a percentage of total reserves and require review if it grows beyond a threshold (for example, if Bitcoin’s price surges and the 1% allocation becomes 5% of reserves, a rebalancing discussion is triggered).

Decision-making for acquisitions and dispositions would likely require high-level approval. The initial decision to establish the reserve and purchase Bitcoin needs UC Regents authorization. Day-to-day management (e.g. the exact timing of purchases or specific custody arrangements) can be delegated to the UC Investments Office, but under strict guidelines. It’s recommended to execute purchases in a phased manner (dollar-cost averaging over several months) to mitigate the risk of price timing and to avoid market impact. The reserve’s performance and status should be reported periodically to the Regents in investment reports, ensuring transparency.

Custody & Security: Given the treasury context, security is paramount – this is a strategic asset of the university. The model approach is to use a professional custodian experienced with institutional crypto custody. UC could either (a) engage a qualified custodian such as a bank or trust company that offers crypto custody (for example, Anchorage Digital, Fidelity Digital Assets, or Coinbase Custody), or (b) hold the Bitcoin in-house with a multi-signature cold storage solution. In either case, multi-signature (multi-key authorization) is advised: require at least e.g. 3 of 5 designated keys to move funds, which prevents any single rogue actor from accessing the BTC . Keys can be distributed among key UC officials (e.g. CFO of UC, CFO of UCLA or another large campus, Chair of Regents’ Investments Committee) and possibly an external independent party or custodian. As a result, any transaction would need sign-off from multiple trusted parties, drastically reducing theft or misuse risk. The private keys would be stored in secure physical and digital vaults (hardware devices in bank safe-deposit boxes, for instance), and key holders would undergo strict protocols (including identity verification, dual control, and disaster recovery plans for key loss). The Chainalysis report on sovereign Bitcoin custody emphasizes that custody is a foundational risk: mismanagement or reliance on a single point of failure could be catastrophic . UC will heed this by implementing redundant, auditable custody procedures. In addition, the university can explore insurance for digital asset custody – some custodians offer insurance policies that cover theft of assets up to a certain value.

Operational Considerations: The Bitcoin reserve would not be traded frequently (if at all). It’s a buy-and-hold position. Therefore, after the initial acquisition phase, operational requirements are minimal – mainly monitoring the security of the holdings and perhaps periodic reconciliation of the wallet (ensuring no unauthorized movement). However, UC should develop an audit process: internal or external auditors should verify the Bitcoin holdings periodically (e.g. by checking that the addresses hold the expected amount and that controls around keys are being followed). This will give Regents and stakeholders confidence that the asset is safe and actually exists (analogous to how gold reserves might be audited). The university should also stay abreast of accounting standards: currently, accounting rules have improved to allow clearer fair-value reporting of crypto , which means UC can mark the Bitcoin reserve to market each quarter in financial statements, giving an accurate picture (previously, crypto was often treated as intangible asset at cost minus impairment, which was less transparent). UC’s financial reporting team will need to incorporate these holdings in compliance with Government Accounting Standards (since UC is public, it may follow GASB standards – likely treating cryptocurrency as an investment asset recorded at fair value, similar to how endowment investments are handled). We note that regulatory clarity is growing: by 2025, U.S. federal law provides more definitions around digital assets and encourages institutional participation , so UC would be operating in a more defined regulatory environment than in years past.

Expected Outcomes: Over a horizon of say 5-10 years, UC’s Bitcoin reserve could either appreciate substantially – contributing to the university’s financial strength – or underperform/trade sideways, in which case the limited allocation insulates UC from harm. In an upside scenario (e.g. Bitcoin continuing its historical trend), the reserve might yield “asymmetric” returns that far outstrip other reserve assets: for example, a 1% allocation that doubles or triples in value would meaningfully boost total reserve levels with minimal downside to other assets. In a downside scenario (Bitcoin falls significantly), UC can afford to wait; unlike an investment fund that might need to liquidate, the strategic reserve can hodl (hold on for dear life) as long as needed. The reserve concept is inherently long-term – much like a university might not sell its land or rare art during a dip, it would view Bitcoin similarly.

In summary, the Strategic Reserve model offers macro-level protection and an innovation statement. It is essentially UC saying: “We choose to hold a small, but strategic position in Bitcoin alongside our cash reserves, as a bet on the future and as insurance against fiscal uncertainty.” This model is recommended as part of UC’s overall financial strategy, provided robust governance as described is in place.

B. Model B – Bitcoin-Denominated Endowment Fund

This model entails creating a Bitcoin Endowment Fund – effectively a pool within the university’s endowment (or a separate endowment fund) that is invested in Bitcoin or Bitcoin-backed assets. It could be structured either as a subset of the main endowment portfolio (with a certain allocation to Bitcoin), or more powerfully, as a distinct fund specifically dedicated to holding Bitcoin (likely appealing to donors who want their gift maintained in BTC). We will focus on the latter interpretation, as it offers more strategic advantages and clarity of purpose.

Fund Structure and Purpose: The Bitcoin Endowment Fund would operate like a traditional endowment in that its principal is invested long-term, and it can distribute a portion of returns to support university needs. The key difference is that the principal is held in Bitcoin (or a basket of cryptocurrencies, though this proposal centers on Bitcoin for its relative maturity). The objectives are long-term growth of capital and fostering of innovation. Because endowments have an indefinite time horizon, they are well-suited to absorb Bitcoin’s volatility in exchange for its high growth potential. Notably, universities like Harvard and Brown have already taken small positions in Bitcoin via ETFs within their endowments, treating it as an alternative asset class . However, UCLA’s initiative could be more direct: actually holding Bitcoin, not just an ETF, to maximize upside and signal true conviction (though using an ETF or trust is an option to reduce custody complexity – discussed later). The University of Austin (UATX) offers a proof of concept: in 2024 they announced “the first long-term endowment fund held in bitcoin,” aiming to raise $5 million that will remain invested in BTC for at least five years . UCLA’s fund could be similar in spirit but larger in scale given UCLA’s resources and alumni base.

Funding and Growth of the Fund: The most compelling way to capitalize the Bitcoin endowment is through philanthropic contributions. UCLA can launch a fundraising campaign around this concept, targeting alumni, tech executives, and crypto enthusiasts. Donors of Bitcoin can give directly to the UCLA Foundation (which would hold the asset) and get a tax deduction at the market value of the Bitcoin at the time of donation . This has proven attractive: for instance, an anonymous donor gave $5 million in Bitcoin to University of Pennsylvania’s Wharton School in 2021 (which they converted to fiat for use, but it shows appetite), and USC’s Keck School of Medicine received a $1.1 million cryptocurrency donation for research . Rather than immediately selling such gifts (the usual practice historically), UCLA’s Bitcoin Fund would retain the crypto. As one industry article noted, a shift is underway wherein universities begin to view crypto not just as a gift to liquidate, but as a long-term asset – exemplified by Emory’s decision in 2024 to put $15 million of its endowment into a Bitcoin fund . If market growth continues, donors could be highly motivated: a donor who gave Bitcoin to an endowment in 2014 saw its value more than 6x by 2024 . UCLA can point to these stories to encourage gifts: “Your 10 BTC gift today could fund a named scholarship in a decade if Bitcoin’s value keeps rising.” Additionally, UCLA might commit some of its own endowment or unrestricted funds to seed the Bitcoin endowment (even a small amount, say $1-2 million, to show institutional buy-in). Such seed funding from UCLA could be presented as a matching incentive: e.g., the university will match the first $X in donations to the Bitcoin Fund, up to a limit. This galvanizes donor interest and quickly scales the fund.

Donor Intent and Policy: It’s critical to define how the fund will operate, especially to satisfy donors and legal requirements. Under the Uniform Prudent Management of Institutional Funds Act (UPMIFA), charities can invest in any asset as long as the portfolio is prudent overall . Donor intent must be honored, meaning if a donor gives crypto and wants it held as crypto, the university can and should do so within the bounds of prudence . UCLA should develop a Gift Agreement template for Bitcoin endowment gifts that clearly states: (a) the gift will be held in Bitcoin (or crypto) for a specified minimum period or indefinitely; (b) the purpose of the fund’s payout (e.g., “to support UCLA’s innovation initiatives” or simply general endowment purposes, depending on donor’s wishes); and (c) any conditions for liquidation (for instance, some donors might allow conversion to fiat after X years or if value rises above a threshold – but ideally, the default is to hold long-term). By setting these expectations, donors will be more comfortable that their contribution isn’t immediately sold off.

From a legal standpoint, as long as the crypto holding remains a small part of UCLA’s total endowment, it won’t violate prudent investment rules . UCLA’s total endowment is several billion dollars; even a $10 million Bitcoin fund (for example) would be well under 1% of that – a “small holding of crypto won’t violate” prudent standards and state law . This is important to articulate to the Regents and Foundation board: we are not risking the endowment’s stability, we are carving out a niche, experimental asset pool consistent with our long-term mission.

Investment Approach: The Bitcoin Endowment Fund would adopt a long-term, buy-and-hold strategy for Bitcoin, possibly with some flexibility to rebalance or take profits for the endowment’s benefit. For at least an initial period (say 5 years, as UATX chose ), the intent would be not to sell the principal. This allows the fund to weather volatility. Bitcoin’s price history shows multi-year cycles; a five-year lockup ensures the fund isn’t forced to sell at a low point. After that period, UCLA might implement a standard endowment spending rule – e.g., each year take up to 4-5% of the fund’s value (or of a multi-year average value) to spend on the designated purpose (or reinvest some portion). The distribution could be taken in BTC (which could be an interesting mechanism: e.g., granting scholarships denominated in BTC) or, more practically, the fund could sell the required BTC for USD at the time of distribution. Alternatively, UCLA might decide to follow a total return with growth approach: perhaps only use Bitcoin’s excess returns beyond a certain hurdle to fund projects, while keeping a base amount intact as quasi-permanent.

It is also possible to diversify within the crypto space – e.g., hold some Ether or other top assets – but given this proposal’s focus and Bitcoin’s dominance as “digital gold,” a pure Bitcoin fund is simpler and aligns with the “currency of the future” narrative. Another implementation detail: UCLA could either hold actual Bitcoin directly or invest in a Bitcoin investment vehicle (like BlackRock’s iShares spot Bitcoin Trust ETF, which Harvard and Brown chose ). Using an ETF can simplify custody and compliance (since the ETF shares are held by a custodian like any stock), and indeed an accounting professor noted that using a fund means “they take on the burden of the technical side… it’s unlikely they’ll steal your money… they manage assets and charge fees” . However, an ETF introduces management fees and some tracking error; holding real BTC gives the full upside and aligns with the ethos of the initiative. UCLA might start with one approach and shift over time as comfort grows. For example, an initial gift could be kept in Coinbase Custody (direct BTC) if that infrastructure is in place; or if needed, temporarily kept via a secure ETF until direct custody is sorted out, because “ETFs… have helped legitimize Bitcoin as an asset and encouraged institutional investors to buy in” . Emory’s case is instructive: they invested in Grayscale’s Bitcoin Trust, which later converted to an ETF, triggering public disclosure . UCLA can proactively decide which route is preferable.

Custody & Security: Similar principles of multi-signature security apply here, but the governance might involve the UCLA Foundation (the entity that manages donations for UCLA). The Foundation could establish its own crypto custody account. If UCLA works with a company like Unchained Capital’s collaborative custody, it could hold some keys, Unchained holds one, and perhaps an independent party holds another – requiring 2-of-3 for any movement . Unchained donated such a custody vault to UATX’s endowment , indicating service providers are keen to partner on these efforts. Alternatively, UCLA Foundation can use a mainstream custodian integrated with its banking (Fidelity, for instance, now offers digital asset custody for institutional clients). The endowment fund will likely have more frequent transactions than the strategic reserve (especially if accepting multiple incoming donations, or making annual payouts), so the custody solution should allow controlled inflows/outflows. One model is to maintain two wallets: a cold storage vault for the bulk of assets (with multiple keys and very infrequent access), and a hot wallet or exchange custody for a smaller working amount to receive new gifts and make distributions, which is periodically swept into cold storage. All movements between these wallets would be under strict dual approvals and monitoring. Regular auditing is again critical – donors and oversight boards will want to know the BTC is secure. Publishing a transparent report of the fund’s value (perhaps even the public blockchain addresses of the cold wallet, since Bitcoin’s ledger is transparent by design) could be considered to build trust. However, care must be taken with public addresses, as noted by Chainalysis: revealing them can invite security risks or unwanted attention , so UCLA might opt for confidentiality on specific addresses.

Use of Funds and Alignment: The Bitcoin Endowment Fund’s payout (when it occurs) can be earmarked for initiatives that reinforce the academic alignment of this endeavor. For instance, the annual distribution might fund scholarships for students studying blockchain/cryptocurrency, or grants for faculty research in fintech, or even fund a “Blockchain Innovation Lab” at UCLA. This creates a virtuous cycle where the Bitcoin investment directly benefits the advancement of knowledge in that domain. It will be easier to justify the experiment if its gains are seen enriching the university’s core missions (education, research). Even during years when payouts are not made, the existence of the fund can benefit UCLA academically: it can be a case study in finance classes, a topic for student investment clubs, or a project for UCLA’s Anderson School of Management to analyze the role of crypto in institutional portfolios (noting that a UCLA finance professor was recently commenting on Bitcoin for endowments in the media – having an internal example would deepen such discourse). The fund could also host student engagement opportunities: for example, an annual report competition where students analyze the Bitcoin fund’s performance and outlook, or even a student-managed portion (for instance, the University of Cincinnati allowed students to recommend crypto investments for a donor-funded crypto portfolio, which turned $50k into a much larger sum by 2024 ).

Risk Management in Endowment Context: Because an endowment has obligations to support the university in perpetuity, risk must be managed. Key risks and mitigations for the Bitcoin Fund include:

• Market Volatility: The fund’s value could fluctuate drastically. Mitigation: set a long minimum holding period (no withdrawals for X years) to ride out cycles. Use smoothing rules for payout (e.g. 3-year average market value for calculating payouts) to avoid over-spending after a boom that could hurt the fund if followed by a bust. Also, limit the size of this fund relative to the total endowment to ensure overall endowment stability.
• Regulatory Changes: If laws change (e.g. adverse regulations that hurt crypto markets or restrict institutional holdings), the fund may need to adapt. Mitigation: keep abreast of legal developments, be ready to pivot to an alternative structure like holding via a regulated ETF or even divest if absolutely required by law. Currently, trends are favorable – regulatory clarity is increasing and institutions are “now joining in out of concern they’ll miss out” rather than legal fears  – but vigilance is needed.
• Opportunity Cost: Bitcoin might underperform other assets (if its future is flat or negative). Mitigation: treat this as a satellite, not core, investment. If it stagnates over, say, a decade, UCLA could reconsider and possibly reallocate the fund into something else (with donor consultation if needed). In the meantime, any donations received specifically for crypto would not have been funds the university otherwise had, so even if growth is zero, there’s little loss except unrealized expectations.
• Public/Fiduciary Scrutiny: Some might question if this is prudent. Mitigation: document the decision process thoroughly, citing how peer endowments (Ivy Leagues, etc.) have started doing the same  . Emphasize that the move is consistent with UPMIFA’s allowance for alternative investments in a diversified portfolio  . Possibly obtain a legal opinion or consulting report to bolster the case that this is within fiduciary norms (many endowments have, quietly, been buying crypto – by 2025 even large foundations like Rockefeller are considering it ). Also, start with a cautious approach as proof-of-concept.
• Donor Relations: Donors to this fund need to accept volatility; clear communication is needed so they’re not surprised by short-term fluctuations. Actually, donors who give crypto usually understand its nature. Some donors might impose conditions like “if value drops below my gift value, do X” – UCLA should carefully negotiate terms to maintain flexibility and not be forced into fire sales.

In conclusion, the Bitcoin Endowment Fund offers potentially high-reward with manageable risk to UCLA. It aligns strongly with forward-thinking philanthropy and can materially benefit the university if Bitcoin’s growth continues. By structuring it as a separate fund, UCLA can insulate the main endowment from any downsides while capturing upside and engaging a new constituency of donors. This model is highly recommended for UCLA given the region’s donor demographics and the university’s appetite for innovative fundraising (UCLA has historically been a top fundraiser and can extend that prowess into the crypto domain).

C. Model C – Hybrid Structure (Reserve-Endowment Blend)

A hybrid approach seeks to capture the benefits of both a treasury reserve and an endowment fund, while mitigating their individual downsides. There are a couple of interpretations of a “hybrid” model:

1. Combined Fund with Dual Mandate: Under this approach, UC/UCLA would create a single Bitcoin pool that is partly treated as a reserve (never spent, only tapped in extreme crisis) and partly as an endowment (generating spendable returns). For instance, imagine a “UC Bitcoin Fund” where the principal (say 50% of the fund) is designated as untouchable reserve capital, and the remaining 50% is allowed to follow an endowment-like spending rule (or at least available for discretionary spending on strategic initiatives after some time). In practice, this might mean the fund grows for a period; then any growth above the reserve principal could be skimmed periodically to support the university. This resembles how some sovereign wealth funds operate: they keep an inviolate core (to preserve national wealth) and spend the investment income. The benefit is UC gets a safety net (the reserve portion that bolsters financial stability) and a source of funding for projects (the endowment portion), all from one asset. It acknowledges that the line between an endowment and a reserve can be fluid – both are long-term holdings, but one eventually feeds back into operations.

In implementation, a combined fund could be governed by a charter stating, for example, “The first X BTC of this fund shall remain in perpetuity as a strategic reserve; any holdings beyond that (due to appreciation or additional contributions) may be appropriated under endowment payout guidelines.” If Bitcoin skyrockets, this ensures gains can be utilized for the university’s benefit (preventing the scenario of sitting on a huge reserve but not using any, which might invite criticism). If Bitcoin falters, the reserve portion provides a psychological (and financial) floor, assuring stakeholders that at least that much value is being preserved for the long haul.

2. Collaborative Funding Model: Another hybrid interpretation is focusing on how the fund is capitalized: combining university treasury funds and private donations into one coordinated initiative. For example, UCLA could propose: “We will contribute $5 million from our reserves to Bitcoin if our donors collectively contribute an equal or greater amount.” This would merge Model A and B in funding – leveraging public and private sources together. The result could be either one pot managed together or two parallel pots (one public, one private) managed under a unified strategy. The advantage is shared risk and shared ownership: the University demonstrates confidence by putting skin in the game, which can encourage donors (they see the university isn’t just asking them to take the risk). Conversely, the donor contributions reduce the burden on university funds and increase the total volume making the effort more significant. The governance of such a co-mingled fund would likely involve both the Regents and representatives of donors. Perhaps a special Bitcoin Fund Council is formed, with members from the UC Investments Office, UCLA Foundation, and key donors/advisors, to oversee strategy.

3. Mixed Asset Approach: A third hybrid angle (less about reserve vs endowment, more about how to hold Bitcoin) is for UC to hold Bitcoin via multiple forms: some directly (in cold storage, functioning like a reserve) and some indirectly (via ETFs or yield-bearing accounts, functioning like an investment). This is more a technical detail to optimize liquidity and yield. For instance, UC could keep a core amount of BTC offline as true reserve, and deploy a portion in a secure lending market or wrapped form to earn modest yield, which could then be funneled to university use. However, this introduces counterparty risk and complexity, so it might be a later-phase idea once basic holdings are established.

For the purpose of this proposal, we’ll focus on hybrid model #1 and #2 combined: a jointly funded fund that has a dual purpose. Let’s call it the UC/UCLA Bitcoin Strategic Fund.

Governance and Structure: This fund could be set up as a separate entity or sub-account managed collaboratively. One option is to house it under the UC Regents’ endowment but earmarked for UCLA (or the system as a whole) with special rules. Alternatively, it could be a new quasi-endowment held by the UCLA Foundation but with Regents’ concurrence on its reserve function. The exact placement may depend on legal convenience and oversight preferences. The governance committee (with both campus and system representation) would set the policy on what portion is inviolate reserve vs. distributable. Suppose the policy says 50% of initial contributions form the permanent reserve corpus. Over time, how to adjust that could be tricky (e.g., if the fund doubles, do we fix reserve at the initial dollar value, or let it also double?). A reasonable approach: denominate the reserve in Bitcoin terms – e.g., if the fund starts with 200 BTC and we designate 100 BTC as reserve, then that 100 BTC remains untouchable; the other 100 BTC’s value fluctuations could be treated more flexibly. This way, if the fund grows to 300 BTC (through appreciation or more gifts), we still keep at least 100 BTC in reserve (maybe even raise it to 150 to maintain a ratio), but we know at least 100 BTC is off-limits. This method aligns with Bitcoin’s nature as a unit-denominated asset (thinking in BTC terms rather than dollars for reserve might be novel but makes sense if believing in its long-term value). A more conservative rule could be: always retain at least the initial dollar value of the reserve portion. So if $5M of university money was the reserve, you ensure when distributing that the fund never goes below $5M in value (in whatever currency). The committee will refine such rules.

Pros of Hybrid: The hybrid fund offers versatility. It can be presented differently to different stakeholders: to the Regents, it’s essentially a strategic reserve with a bonus that it might fund projects; to donors, it’s an endowment that the university itself has also invested in, demonstrating commitment. It might also smooth out internal approvals – perhaps the Regents are more willing to approve a smaller reserve spend if donors are matching it (less political risk), and the UCLA leadership is more comfortable knowing some of the Bitcoin’s upside can come back to campus uses rather than locked away. Another pro is it creates a system-campus partnership: UCLA could lead the pilot, and if successful, the model could be expanded to other UC campuses. For example, one could imagine each campus eventually having its own Bitcoin fund, with the UCOP providing matching funds or central oversight – a true hybrid of centralized and decentralized efforts.

Risks/Challenges of Hybrid: The complexity of dual-purpose could lead to disagreements – e.g., campus might want to spend some gains to build a new lab, while Regents might say “no, it’s strategic reserve, we wait.” This can be mitigated by very clear rules upfront in the fund charter. For instance, define triggers or allowable uses for the “spendable” portion: “If the fund’s value exceeds the reserve threshold by X%, the excess may be appropriated for capital projects or endowment payout, with approval from the oversight committee.” Another challenge is accounting: mixing public and private funds might require careful tracking to ensure donor funds and university funds are used as intended. Likely, the simpler way is to treat all contributions (university’s and donors’) as part of one endowment fund, but the university’s contribution can be recorded as an internal quasi-endowment with certain restrictions. There may also be tax or legal differences: the UCLA Foundation (as a 501(c)(3)) can mingle with donor gifts easily, whereas direct UC funds might need an agreement to transfer to the Foundation’s care for this purpose (something that is done in some cases for managing certain investments). These are solvable with MOUs and should be explored with counsel.

Implementation Pathway: A hybrid fund could be kicked off via a pilot program at UCLA. Step 1: Obtain Regents’ conceptual approval for UCLA to invest, say, $2M of discretionary funds as a reserve contribution to a new fund. Step 2: Concurrently, quietly identify lead donors (perhaps an alum in the crypto industry) to contribute another $2M (or BTC equivalent) to the fund. Step 3: Form the fund structure (maybe under UCLA Foundation with oversight roles for UC). Step 4: Publicly announce when at least, say, $5M total is committed, to demonstrate significance. Market it as a groundbreaking partnership: “UCLA and its supporters create a first-of-its-kind Bitcoin-denominated fund blending public and private investment.” This narrative could be powerful. It also hedges perception – it’s not just the university gambling; it’s a collaboration, which implies due diligence from multiple sides.

Custody & Management: Practically, the assets would be managed similarly to Model B’s description (with multi-sig custody, etc.), since it’s effectively an endowment fund in operation. The only twist is oversight: the custody keys or access rights could include persons from both UC and UCLA sides as described, to reflect shared control. This redundancy is also safer (in case one party’s key is compromised, others still protect).

Use Cases for Funds: What might the “spendable” portion do? Possibly, a portion of the fund’s growth could feed into UCLA’s Innovation Fund – financing startups from campus research, or funding interdisciplinary research in blockchain, etc. Or it could simply augment the general endowment payout for UCLA’s budget. This again should be predetermined: maybe specify that any distribution goes towards a cause that resonates with the donor side too (like student scholarships in tech). Aligning with a noble cause will make it easier to justify drawing from the Bitcoin pot when the time comes and will celebrate the fund’s success tangibly.

In summary, the Hybrid model is the most complex but offers a comprehensive strategy. It acknowledges that UC/UCLA might not want to lock away value eternally if fortunes rise, nor do they want to miss having an inviolable safety asset. It’s a creative solution that can be tailored as experience dictates. The hybrid can start leaning more towards reserve (in early years when uncertainty is higher) and gradually evolve to include endowment payouts as confidence in Bitcoin solidifies and as gains accrue. This flexibility is a strength – UC can calibrate the model over time.

The recommendation could be to initially pursue Model A and B in parallel (a small reserve at system level and a donor-fueled endowment at UCLA). Once both are running and stakeholders are comfortable, in the medium term consider merging them into a Hybrid approach – or expanding one of them to incorporate features of the other. The models are not mutually exclusive; indeed, a phased approach might use each at different times. The ultimate goal is to embed Bitcoin in UC’s financial strategy in a prudent, phased manner that maximizes benefits and minimizes risks.

Legal, Financial, and Regulatory Implications

Implementing a Bitcoin reserve or endowment at a public university involves careful consideration of legal authority, fiduciary duty, and regulatory compliance. Below we outline the key implications and how to address them:

1. Authority and Fiduciary Duty: The University of California, being a public trust, must adhere to the fiduciary standards of prudence and loyalty in managing its funds (whether state funds, tuition funds, or donated funds). The UC Regents have ultimate authority over investment decisions for both systemwide assets and the endowment, often guided by an Investment Policy Statement. Introducing Bitcoin as a new asset class would likely require an amendment or exception to these policies. However, modern fiduciary standards (including the Uniform Prudent Investor Rule as adopted in California) do not prohibit any specific asset as long as the decision is made in context of the portfolio’s overall strategy . The prudent investor rule emphasizes a total portfolio approach and reasonable care, skill, and caution – which means small, calculated allocations to crypto can be justified as part of a diversified plan . To fulfill fiduciary duty, UC must document a rational investment thesis for Bitcoin: e.g., showing its diversification benefits and inflation hedge properties, citing how other respected institutions are investing (evidence that it’s within the norm of institutional finance). We can point out that multiple university endowments and foundations are now investing in crypto, and doing so is increasingly seen as prudent rather than fringe. In fact, by early 2025 many who “had long avoided investing in crypto are now joining in out of concern they’ll miss out” . The UC Regents would need to formally approve any direct holdings of cryptocurrency, as it’s likely not enumerated in current policy. This could be done through a resolution or an update to the list of allowable asset classes (perhaps adding “digital assets” in the alternatives category). The investment should be framed not as speculation but as a long-term strategy consistent with UC’s objectives (preservation of purchasing power, diversification, etc.). It would be wise to get an opinion from the Office of General Counsel and possibly external counsel that holding crypto is within UC’s legal powers and does not conflict with any state law. California law does not expressly forbid public entities or endowments from owning cryptocurrency. As long as it’s a legal property (which it is – cryptocurrency is legal and recognized as property by the IRS ), UC can own it just like it can own commodities or foreign currencies.

One area to be cautious: public funds accountability. UC, as a state instrumentality, may face scrutiny from state lawmakers or auditors on any perceived risky use of funds. Thus, any allocation of state-appropriated funds to Bitcoin might be controversial. It may be more palatable to use non-state funds (e.g. unrestricted investment income or discretionary reserves, or donor funds) for initial crypto investments. The UC Regents’ Investment Policy likely gives them broad authority over endowment assets – and the General Endowment Pool (GEP) already invests in “alternative investments” which could conceptually include digital assets . In 2022, the Foundation Group noted that charities/trusts can invest in crypto but should keep the percentage moderate to stay within prudent limits . For example, if UC were to allocate ~1% of its endowment or reserves, that is clearly within the bounds of a prudent experiment . Additionally, donor intent law supports this: if donors give crypto or want their gift in crypto, UC can accept and hold it, as charities have a responsibility to honor donor intent as far as legally possible . This means legally, the UCLA Foundation could establish a crypto endowment if donors explicitly fund it – it would be upholding, not violating, its fiduciary role by doing so (provided risk management is in place).

In summary, legally UC has the power to do this, but must exercise that power prudently. By keeping allocations small and oversight strong, UC can defensibly say it’s meeting prudent investor standards. Engaging the Regents early, educating them with data and peer examples, and possibly doing a small pilot (say $500k to a Bitcoin ETF) as a trial run, could satisfy fiduciary caution while moving forward. The Regents’ approval process might involve the Investments Committee reviewing a briefing paper and then the full Board voting on an amendment to allow crypto investments. This can be approached similarly to when endowments first started investing in other exotic assets – with expert consultants providing reassurances. Indeed, some Regents might already be aware that places like Harvard’s endowment made a $117M allocation to a Bitcoin fund, reflecting growing acceptance . Ensuring key stakeholders (the CIO, the Chair of the Regents’ investment committee) are on board will smooth the legal approval.

2. Regulatory Compliance (Financial Regulations): Cryptocurrency falls into a bit of a regulatory patchwork, but holding Bitcoin itself is not heavily regulated – it’s essentially holding property. However, there are regulations to heed:

• Custody Regulations: If using an outside custodian, that custodian should be a regulated entity (e.g. a New York Trust company, a Qualified Custodian under SEC rules if applicable). Under SEC custody rules (for investment advisers), using a qualified custodian for client assets is required. While UC is not an investment adviser to a client, as a fiduciary it should similarly use qualified custodians for safety. Many big financial institutions have entered the crypto custody space, and legislation in 2025 has further clarified roles of agencies in overseeing digital assets . For example, national banks have been authorized to custody crypto assets. UC will choose a custodian that is compliant with relevant regulations (possibly one with a SOC 2 audit report, etc.). If UC were to self-custody, it should implement internal controls equivalent to regulatory standards.
• Securities Laws: Buying Bitcoin itself is not a securities transaction (the SEC has categorized Bitcoin as a commodity, not a security). So UC would not be subject to securities law in holding BTC. If UC buys a Bitcoin ETF (like BlackRock’s iShares Bitcoin Trust), that is an SEC-regulated security, but that’s straightforward – it’s like buying any ETF. The ETF’s sponsor deals with crypto holdings; UC just deals in shares. If UC were to invest in a crypto fund or partnership, due diligence on that fund’s compliance (e.g., fund registration exemptions) would be needed, but that’s standard for alternative investments.
• Tax Considerations: UC and UCLA Foundation are tax-exempt. Any gains on cryptocurrency will accrue tax-free (no capital gains tax due when they sell, as with other endowment investments). However, if any portion were held in an entity that is not tax-exempt (unlikely here), then Unrelated Business Income Tax (UBIT) could be an issue especially if doing things like lending crypto. The straightforward approach of buying/holding/selling crypto produces no UBIT for a nonprofit (it’s analogous to stocks or commodities). Donors who contribute crypto need proper receipts – as mentioned earlier, the IRS treats crypto as property, so donors will have to fill out Form 8283 for non-cash charitable contributions and perhaps get an appraisal if over $5k value. UCLA Foundation should be prepared to assist donors with that and comply with IRS substantiation rules (though for readily traded crypto, an exchange price can suffice as value).
• Accounting and Reporting: As a public entity, UC may follow Governmental Accounting Standards Board (GASB) guidelines. GASB has not yet (as of 2025) issued specific crypto guidance, but likely crypto would be classified as an investment and marked to market (similar to how GASB treats equity investments for endowments). UC’s financial statements and footnotes would have to disclose the presence of cryptocurrency, likely including how it is valued and categorized in the fair value hierarchy. Internally, the volatility may complicate quarterly reporting, but new FASB rules (for private entities) allow fair value changes through earnings, which is a more sensible approach. We anticipate GASB or auditors will accept a fair value mark each period for transparency. On the operational side, UC will need to develop procedures for valuing its crypto holdings at year-end (which is simple for Bitcoin – use a recognized index or exchange price on June 30). Also, internal audit might include crypto wallets in their scope, verifying existence and controls.
• Public Records and Transparency: Being a public institution, records of these investments could be subject to public records requests or mandated disclosures. Emory, as a private university, didn’t have to disclose its Bitcoin until the SEC filing forced it , but UC might have to list it in investment reports. That means decisions and outcomes could be quite public. The university should be prepared to justify the initiative to various stakeholders (legislators, taxpayers, students). This is more of a PR/political consideration than a regulatory one, but it intersects with legal in terms of ensuring no sunshine law or ethical violation. All transactions will need to follow UC procurement and conflict-of-interest rules (e.g., if a Regent or staff has a personal interest in a particular crypto exchange or company, they must recuse themselves from decisions in that area to avoid any impropriety).
• State Law Constraints: We should verify if California law has any specific prohibition or guidance on public entities investing in crypto. For example, some states have passed laws regarding public treasuries and crypto (Wyoming is extremely favorable, allowing and even encouraging it; other states have been silent). California has generally been open to blockchain (the state DMV exploring blockchain, etc.), but cautious on consumer crypto regulation. There doesn’t appear to be a statute forbidding UC from holding crypto. UC has constitutional autonomy on internal matters (as a constitutional corporation under Article IX, Section 9 of CA Constitution), which likely extends to choosing investment assets, so state legislation would likely not directly bar UC’s endowment choices. Nonetheless, UC might voluntarily work with state oversight bodies (like the Governor’s office or Department of Finance) to ensure no concerns.
• Risk of Future Regulation: A risk is if down the line regulators impose restrictions (for example, if the SEC were to classify some crypto holdings differently, or if environmental regulations discourage certain crypto investments due to energy usage). Mitigation is to stay flexible: hold Bitcoin in forms that can be liquidated if absolutely required, and keep an eye on any bills or policies (at federal or state level) that might affect institutional crypto holdings. The proposal should mention that UC will maintain compliance with all applicable laws and adapt as needed – for instance, if a future law required certain disclosures or sustainability standards for crypto, UC would comply. In 2025, however, the trend is toward acceptance: Congress is pushing crypto regulatory frameworks (e.g., stablecoin rules, digital commodity definitions) that actually make it easier for institutions to invest by clarifying oversight . The House even passed bills this year to provide the first federal laws for digital assets . So UC is stepping in at a time when regulatory clarity is the best it’s ever been.

3. Financial Risk Implications: Beyond legal compliance, the introduction of Bitcoin has financial risk implications that need mitigation:

• Volatility Risk to Balance Sheet: A large drop in Bitcoin’s price could reduce the value of the endowment or reserves. From a financial perspective, this could affect metrics like endowment per student, or could cause headlines about “UC loses $X million in crypto investment.” The best way to manage this is sizing (keep it small relative to total assets) and stressing that realized losses would only occur if UC sold at a low; if it’s holding, it’s an unrealized fluctuation. Accounting might force us to report unrealized losses, but UC can contextualize that in reports (just as it does for public equity swings). The impact on spending is contained if we segregate the Bitcoin fund – i.e., don’t plan to use it for operating budget until it’s matured enough or gained value.
• Liquidity and Cash Flow: For a strategic reserve, one must consider: is Bitcoin sufficiently liquid if we ever needed to convert it to cash in a pinch? The good news is yes – Bitcoin trades 24/7 with large volume; UC could liquidate millions in a day if required (though possibly with some slippage if done carelessly). It’s arguably more liquid than some of UC’s private equity holdings which could take months to sell. That said, if there were a financial crisis coinciding with a crypto crash, converting BTC to cash at that moment might lock in losses. So if a reserve fund is meant as an emergency fund, UC should ensure it has other stable reserves too (which it does, like short-term bonds, etc.). The Bitcoin reserve is more of a last resort store of value, not the first line of defense for liquidity. So the presence of Bitcoin should not impair UC’s ability to meet cash calls or debt service – those should still rely on more stable pools.
• Cybersecurity/Operational Risk: This is addressed in Governance & Custody section in detail, but from a financial audit perspective, a big risk is theft or loss. Unlike a hacked bank account (which might be FDIC insured or reversible to some extent), a hacked crypto wallet is irreversible. So internal controls must be watertight. We might consider engaging an external security audit firm to periodically review our crypto custody procedures – akin to a penetration test. Also, insurance policies might be purchased (some providers offer crypto custody insurance up to certain limits).
• Regulatory Enforcement Risks: If any regulatory body (SEC, CFTC, state regulators) initiated action or subpoenas related to crypto, UC could be indirectly affected (for instance, if using a particular exchange that is then investigated). To mitigate, UC should use well-vetted, compliant service providers. Avoid any dealings that could be seen as gray-area (for example, avoid using off-shore exchanges or engaging in yield farming or anything beyond straightforward holding). By sticking to Bitcoin and possibly SEC-approved vehicles, UC stays in a very clean legal zone.

4. Governance and Policy Updates: Legally, the Regents may need to adopt a specific resolution or policy about digital assets. This could outline the purpose (diversification, etc.), the risk controls (max allocation, etc.), and reporting requirements (maybe quarterly reports on the Bitcoin holdings to the Committee on Investments). Having a formal policy will help satisfy any external overseers that UC is handling this responsibly. The policy should probably also address ESG considerations, given UC’s strong stance on certain ethical investments (UC already divested from coal and is attentive to sustainability). Bitcoin’s environmental impact has been debated, and as a public university, UC might get questions about supporting an energy-intensive technology. The policy could note that UC will monitor Bitcoin’s environmental footprint and support improvements (like possibly favoring coins mined with renewables, or advocating for sustainable mining – though practically if buying on the market, one can’t select by provenance easily). We might articulate that holding Bitcoin is not directly funding new carbon emissions (unlike investing in a fossil fuel company), but we acknowledge the issue and will engage with industry efforts to make mining greener. This small nod can help legally/PR-wise if someone challenges it on climate grounds.

In conclusion, the legal/regulatory landscape is navigable and increasingly favorable. The key is ensuring prudent process and documentation. As Forbes recently pointed out, universities investing in crypto face fiduciary challenges but these can be met by starting small and treating it like any other high-risk/high-reward allocation . We will proceed in a manner that fully respects UC’s public trust obligations, maintaining transparency and rigorous control.

(Note: We experienced no insurmountable legal barriers in our research on connected sources; if any unexpected legal issues arise during detailed planning, we will address them with targeted legal counsel. The overall finding is that nothing in connected sources suggests UC cannot legally do this – it simply must do it carefully.)

Governance and Custody Models for Institutional Bitcoin Holdings

Proper governance and custody are critical to the success of this initiative. Unlike traditional assets, cryptocurrencies are bearer instruments – control of the cryptographic keys equals control of the assets. Thus, robust governance structures and technical custody solutions must work hand-in-hand to ensure security, accountability, and continuity. Below we outline the recommended models in these areas:

1. Governance Structure and Decision-Making:

For each of the Bitcoin initiatives (reserve or endowment fund), we propose a layered governance approach:

• a. Oversight Committee: Establish a dedicated Bitcoin Oversight Committee at the appropriate level. For a systemwide reserve, this might be a sub-committee of the Regents’ Investments Committee (including Regents, the CIO, and perhaps an external crypto expert as an advisor). For the UCLA endowment fund, a committee under the UCLA Foundation’s board (including trustees, key donors, campus financial leaders, and an external expert or alumni in the field) would oversee. This committee’s role is to set high-level strategy and policies: e.g., allocation percentage, hold/sell guidelines, rebalancing triggers, and to review performance and risk periodically. It functions similarly to an investment committee for any new asset class, bringing specialized knowledge. The committee should also develop and approve an Emergency Action Plan – what happens if something goes wrong (e.g., a security breach, or a regulatory shock). Having a pre-defined plan (like freezing any transactions and convening an emergency meeting) will save time in a crisis.
• b. Clear Role Definitions: We should delineate roles such as: Key Holders, Custodian (if third-party), Transaction Approvers, and Auditors. Key Holders are individuals entrusted with parts of the cryptographic keys – likely senior officials or trustees who are bound by fiduciary duty and have undergone training. Transaction Approvers could overlap with Key Holders or be a slightly broader group who must sign off on any movement of funds (for instance, even if multi-sig allows 3 of 5 to move funds, policy might say any planned transaction must be approved in writing by, say, the CFO and one committee chair before keys are used, to provide an administrative checkpoint). This two-layer approval (policy approval, then key signing) minimizes chance of even collusion among key holders, since an out-of-band transaction without committee knowledge would violate policy even if technically possible. Essentially, no single person should ever be able to transfer the Bitcoin unilaterally – not even the CIO or campus CFO – which is achievable via multi-sig and written procedures.
• c. Multi-signature Governance: Multi-signature (“multi-sig”) refers to requiring multiple independent secret keys to authorize a transaction. We strongly recommend using multi-sig wallets for holding UC’s Bitcoin . In governance terms, this means multiple individuals or entities are involved in every transaction, which greatly reduces risk of misuse. For example, a 3-of-5 scheme could involve: one key held by UC’s CIO office, one by UCLA’s CFO (for a UCLA-specific fund), one by the external custodian, one by an independent third party (like a trusted law firm or a board member), and one in a secure escrow (like in a bank vault as backup). The requirement of 3-out-of-5 provides both security (an attacker needs compromise 3 different key holders) and business continuity (if one key is lost or one person unavailable, operations can continue with 3 of the remaining 4). We would document exactly which roles correspond to keys and what combinations are acceptable. For instance, maybe the policy says one of the 3 signatures must always be the custodian’s key (as a neutral party) plus two from UC/UCLA officials. Or it could be any 3 of 5 regardless. The combination can be adjusted as needed – for even higher security, 4-of-6 could be used, but that adds complexity and risk of inability to get all required signers in time. We believe 3-of-5 is a good balance for an endowment-like use case.

If a third-party custodian is used (which is likely), often they can provide multi-sig where they hold one key and the client holds the others. For example, Coinbase Custody supports multi-user approvals. Unchained Capital’s model (for UATX) was 2-of-3 with the university holding 2 keys and Unchained 1 – meaning Unchained cannot move funds on its own (good), and the university can move funds using its 2 keys without Unchained (which is also good for independence, but it does place more burden on the university to protect both keys). We might instead do 2-of-3 or 3-of-5 where the University does not have enough keys alone; requiring at least one key from a third party ensures internal collusion alone can’t steal funds. One could engage two different custodians each holding a key, plus UC holds the rest – adding redundancy so that if one custodian (or one key holder) fails or is compromised, funds are still safe.

• d. Custodial Partners: Engaging a reputable custodial partner is highly recommended. They offer secure storage (like hardware security modules in vaults), insurance coverage, and audited processes. The custodian could be given limited agency – e.g., they might be instructed to only co-sign transactions that have documented approval from UC’s committee. This can be contractual. The custodian also often has compliance tools (for example, they can whitelist withdrawal addresses so funds only ever go to UC’s known bank account or another approved wallet). We will utilize these features to “fence in” the crypto: even if keys were somehow stolen, they couldn’t direct funds to arbitrary addresses if address whitelisting is in effect. (Bitcoin technology itself doesn’t whitelist, but custodians can enforce it on their platform.)

Working with established firms also provides a measure of accountability and recourse. For instance, if something goes wrong in custody (like loss due to their negligence), we may have legal recourse or insurance payouts. If we self-custody entirely, we bear all the risk. So a hybrid approach with a custodian involved is prudent.

• e. Internal Controls and Procedures: Detailed procedures will be written covering: key generation (done in secure, witnessed ceremonies), key storage (split and stored in multiple secure locations – safety deposit boxes, encrypted flash drives in vaults, etc.), key usage (e.g., a protocol for assembling key holders and using their keys for a transaction), and key replacement (if someone leaves position or a key is suspected compromised, how to rotate to new keys safely). We will maintain redundancy: for example, if we use hardware wallets, we’ll have securely stored backups of the seed phrases in case the device fails. We will also likely implement a policy of no single person ever handling or seeing entire seed phrase – break each key’s backup into multiple parts stored separately, so even a rogue staff finding one backup can’t get the whole key. These practices are common in high-security crypto custody.

It’s also advisable to require multiple people present whenever keys are accessed (say, two key holders must together access a vault to retrieve their devices, etc., akin to dual-control in sensitive operations). Camera surveillance or logging of any key usage is another layer.

Auditability and Accountability: All transactions and key management actions should produce logs (who requested, who approved, when executed, transaction ID). Because Bitcoin’s blockchain is public, we can verify externally that no unexpected transactions occurred. We can give read-access to the wallet addresses to auditors or even publish them for transparency (though as noted, that has trade-offs). At minimum, an internal auditor should reconcile that holdings on-chain match the reported holdings and that any movement had proper approvals.

The oversight committees should receive regular reports. For an endowment fund, a quarterly performance report including the BTC holdings and their value suffices. For a reserve, maybe an annual confirmation that X BTC is still held and secure. If the value swings wildly, interim updates might be prudent so everyone remains informed. Communication is key – surprises lead to panics or poor decisions, whereas if Regents are gradually educated through regular reports, they’ll be more comfortable during volatility.

2. Custody Models:

We’ve touched on custody above, but let’s break down options and recommended models explicitly:

• a. Third-Party Institutional Custodian (Full Custody): UC/UCLA could entrust the Bitcoin entirely to a regulated custodian (like Bank of New York Mellon, Coinbase Custody Trust, Fidelity Digital Assets, or Anchorage) who holds the private keys on UC’s behalf. UC would have an account and instruct the custodian when to execute transactions. This is the simplest operationally, as it mirrors how stocks are held (custodian has them, you see a statement). The drawback is a single point of failure – if that custodian is hacked or goes bankrupt, UC could lose access (even though legally the assets are ours, in practice bankruptcy proceedings can tie things up; e.g., users of FTX learned this painfully). Also, relying on one custodian means if their security fails, all is lost. However, top custodians have strong security and often insurance coverage. This approach also gives us a clear compliance trail, and they handle the technical heavy lifting. Given UC’s risk aversion, we likely would use a major custodian for at least initial holdings, but possibly in combination with multi-sig as below.
• b. Multi-Signature Self-Custody (Shared): Here, UC splits keys among internal holders and possibly a service provider. For example, Unchained Capital offers a collaborative custody where they hold 1 key and the client holds 2 of 3 keys. In this model, UC maintains control but benefits from the provider’s expertise (they can step in if UC loses a key, and they perform certain checks before cosigning). Another route is purely internal multi-sig: e.g., 3 UCLA/UC officials each hold one key device, and 2 of them can move funds. This eliminates external dependency but puts all security on us. The multi-sig addresses are on the Bitcoin network itself (not reliant on an exchange), which is nice – it’s transparent and not tied to any third-party solvency. The downside is it requires significant in-house expertise to set up and manage safely. We would need training for key holders and perhaps hire a crypto security consultant initially. Given that cost, partnering with a firm like Unchained or Anchorage (which can do multi-sig where we hold majority of keys) is a good in-between. For instance, Anchorage could hold one key in their HSM, we hold two – so any transaction needs Anchorage’s approval plus ours, or vice versa depending on setup.

Multi-sig on Bitcoin also means if keys are lost beyond threshold (e.g., you lose 2 keys in a 2-of-3), funds are irrecoverable. That’s why robust backup is crucial. Some custodians have key recovery services (like they can shard keys into multiple pieces and geographically distribute them, retrieving them when needed). We will likely incorporate such sharding as a backup strategy: break each seed into, say, 3 parts and store each part separately (so one would need to retrieve all parts from different banks to reconstruct a key).

• c. Smart Contract Custody / Programmable Governance: While Bitcoin’s scripting is limited, one could use a time-lock script for additional safety. For example, coins could be put in a script that requires multi-sig and will not allow spending until a certain date or unless an emergency backup key signs after a timeout. This is somewhat advanced and not broadly used by institutions yet, but it’s conceptually possible (using Bitcoin’s CheckSequenceVerify or CheckLockTimeVerify). Another approach is using a permissioned blockchain or wrapping Bitcoin into a token that has smart contract controls (for instance, wrapping BTC into an ERC-20 and then using a Gnosis Safe multisig contract). However, wrapping introduces another layer of risk (the custodian of the wrapped token). So likely not worth it just for fancy contract control.

One pragmatic idea is to use time-lock vaults for some of the reserve: e.g., send a portion of BTC to an address that is unspendable until year 2030. This absolutely forces a long-term hold (no temptation to sell early). But it also means if there was a dire need or great opportunity, that portion is illiquid. Perhaps a small fraction (like 10%) could be time-locked to demonstrate commitment, but probably unnecessary.

• d. Operational Wallet vs Storage Vault: We may implement a two-tier system: an operational wallet for handling day-to-day transactions (especially for an endowment that receives frequent donations or needs to distribute payouts), and a deep cold storage vault for the bulk. The operational wallet might be with a reliable exchange or hot wallet with small balance – only what’s needed for the short term. For example, if a donor wants to donate Bitcoin, we provide them a deposit address from our operational wallet (with, say, a 1 BTC capacity at risk). Once received, we swiftly transfer it to the cold vault. This limits exposure of private keys that are online. The deep vault would be offline (air-gapped devices, keys in safe, etc.), not connected to the internet except at the moment of signing a transaction, and even then done on a computer not connected to any network (using QR codes or USB drives to transfer the signed transaction). This is standard practice for securing large crypto amounts.

3. Risk Management and Insurance:

No custody setup is complete without addressing what if something goes wrong. We recommend:

• Insurance: Explore obtaining a crime insurance policy or digital asset insurance that would cover theft or loss of the cryptocurrency due to theft, employee dishonesty, hacking, etc. Some major insurers now underwrite such policies for institutional holders. The cost will depend on the amount insured and security measures in place. If using a third-party custodian, see if they carry insurance that covers client assets (Coinbase Custody, for example, has a certain insurance for its holdings). Insurance may not cover all scenarios (often exclusions for state actor hacking or for your own negligence), but even partial coverage (say up to $X million) is better than none. It adds a layer of financial protection and also imposes discipline (insurers will want to see our security protocols, which is a good check).
• Regulatory Compliance in Custody: If we custody assets ourselves (even partially), we must abide by any regulatory guidance on cybersecurity for financial assets. While UC is not a bank, we can follow NIST cybersecurity framework or the ISO 27001 standards for our processes. This includes regular security audits, penetration testing (maybe not directly applicable to cold storage, but one can test operational systems), and strong incident response plans.
• Counterparty Risk: If a custodian is used, monitor their financial health and reputation. Perhaps diversify across two custodians if the holdings become very large (don’t put all eggs in one basket). For example, keep half the BTC with Custodian A and half with Custodian B, to mitigate risk of one failing (similar to how one might use multiple banks). This does complicate key management but is doable.
• Compliance and Monitoring: Although Bitcoin transactions are pseudonymous, UC should ensure its wallets are not tainted by illicit funds (especially if receiving donations directly in BTC). Using blockchain analytics (many custodians provide this, or companies like Chainalysis) to screen inbound donations can ensure we’re not inadvertently helping launder money or dealing with sanctioned addresses. For example, if someone tries to donate BTC that came from a known hack or sanctioned entity, we need a procedure to reject or quarantine that. As a public entity, we must avoid any perception of facilitating bad actors. The transparency of blockchain is actually helpful here: one can trace the provenance of BTC. The oversight committees should perhaps have a policy that any gift will be screened (using OFAC sanctions list etc.) and if high risk, converted to cash immediately or even declined.
• Adaptability: Periodically, the governance committee should review new custody tech or services. The crypto security field evolves (for instance, new multi-party computation (MPC) custody solutions exist that remove the need for explicit key shares). We should remain open to upgrading our custody if a safer method is proven. But any migration of custody must be done extremely carefully (moving keys has risk, so do it seldom).

In summary, the governance and custody plan is to use multiple layers of approvals (human governance) combined with technological multi-signature controls to ensure that no single point of failure exists – not a single person, not a single device, not a single location. This aligns with best practices observed in the sector: government-held bitcoin is often fragmented and needs central management to avoid inconsistent security , and a similar principle applies to UC – we centralize policy but decentralize actual key control. We recall cautionary tales like exchange hacks (e.g., the FTX collapse ) to underscore why UC will not leave coins on an exchange and not trust any one actor blindly. By building a fortress of checks and balances – “trust, but verify” at every step – we aim to make the risk of loss extremely remote.

Finally, we’ll cultivate an institutional culture of security around this. Those involved will be trained to maintain confidentiality (keys are essentially more sensitive than cash vault codes), and routine drills can be conducted (for example, simulate the loss of one key and walk through the recovery procedure) so that if a real incident happens, everyone knows their role. The credibility of UC as a steward of digital assets will depend on flawless execution in this area, so we devote substantial attention and resources to governance and custody excellence.

Risk Analysis and Mitigation

Investing in Bitcoin inevitably introduces a set of risks distinct from traditional assets. A thorough risk analysis is vital, along with strategies to mitigate each risk. Below we examine the major categories of risk – market volatility, regulatory risk, cybersecurity, operational risk, and reputational risk – and detail how the UC/UCLA plan addresses them:

1. Market Volatility Risk: Bitcoin’s price history is notoriously volatile. It has experienced multiple drawdowns of 50-80% or more in past cycles (e.g., dropping ~85% in 2018, ~50% in spring 2021, etc.), as well as rapid rises (2025 saw a surge from $75k in April to $123k by July ). This volatility can impact portfolio values significantly. The specific risks include: a) potential loss of market value, reducing the fund’s ability to support university spending (for endowment) or weakening the reserve’s value; b) high volatility can lead to emotional or political pressure to sell at the wrong time, locking in losses, or conversely to take profits too early and miss long-term gains.

Mitigations: We adopt a long investment horizon and a limited allocation size. By treating Bitcoin holdings as 5+ year investments (or even perpetual endowment), we give time for recovery from downturns. Historically, despite interim crashes, Bitcoin’s long-run trend has been strongly up; a Horizon analysis shows multi-year holding periods have higher probability of positive returns. For instance, a statistic often cited is that holding Bitcoin for at least 4 years historically covered any loss periods (though not guaranteed for the future). Our plan not to rely on these funds for annual operating needs insulates us from being forced to sell low. Additionally, position sizing is crucial: as recommended by nonprofit advisors, “most charities won’t hold much cryptocurrency as a percentage of their portfolio…holding too high of a percentage…runs the risk of violating state law [prudent management]” . We take this to heart by capping the initial allocation to a small single-digit percentage of investable assets. This means if Bitcoin’s price halved, the impact on the overall portfolio is minor (e.g., a 2% allocation becomes 1% – a loss of 1% of total portfolio, which is within normal yearly fluctuations for an endowment). We will also internally perform stress tests – modeling scenarios like a 80% crash – to ensure the broader financial position (and any spending commitments tied to these assets) remains sound.

We will implement a gradual entry (phased buy-in) to mitigate timing risk. Rather than buying all at once at potentially a local peak, UC can average in over, say, 6-12 months. This reduces the risk of immediate large losses from buying at a bad time and smooths out cost basis. Similarly, if we ever needed to liquidate (hopefully not, but say to fund a project or if we chose to reduce exposure), we’d do so gradually or during periods of market strength.

Psychological and governance measures will also help with volatility: by having a clear policy of “no panic selling” and explicit criteria for rebalancing, we avoid ad-hoc reactions. For example, the oversight committee might set that we will not consider selling any reserve BTC unless (hypothetically) the price exceeds a certain high threshold or if there’s a fundamental change in the thesis. On the downside, instead of selling after a crash, a better plan might be to rebalance (i.e., if Bitcoin falls and is under target allocation, we could even buy a bit more to get back to target weight, if conviction remains – this is a standard approach to manage volatility and can enhance returns). However, such rebalancing will be cautious given crypto’s extreme moves; likely we set wide bands (e.g., only rebalance if allocation deviates by more than 50% of target, etc.).

A final mitigation: consider holding through a full market cycle before drawing any funds. As noted, University of Austin committed to a 5-year hold . We could do similarly, meaning we won’t touch the principal for 5 years, giving a chance for any interim dips to potentially recover. Historically, Bitcoin has always reached new highs after some years; while the future may not guarantee that, a multi-year patience policy is our best tool against volatility risk.

2. Regulatory and Legal Risk: The regulatory environment for cryptocurrency is evolving. There are risks that new laws or regulations could negatively impact the value or even the permissibility of holding Bitcoin. Examples: governments could ban certain crypto activities, impose strict taxes, or classify crypto in a way that affects institutional holders. Also, as a public university, any change in state policy (e.g., California legislature taking a stance on public funds in crypto) could affect us.

Mitigations: We actively monitor regulatory developments. As of now (2025), trends are positive in the U.S.: for instance, “the House… passed key bills related to cryptocurrencies… the first federal law for digital assets”, indicating increasing clarity and acceptance . The establishment of the U.S. Strategic Bitcoin Reserve by the federal government itself shows a level of official endorsement of holding Bitcoin . These moves lessen regulatory risk for institutional holders. However, we remain vigilant. We will maintain dialogue with UC’s governmental relations and legal counsel to get early warning of any adverse policy shifts. If, hypothetically, California were to consider a bill prohibiting agencies from crypto investment (which we are not aware of any such move, but we imagine scenarios), UC can seek exemptions given its constitutional autonomy or adjust strategy (perhaps moving assets to the Foundation, which is a private nonprofit, if state agencies were banned but private ones not).

Tax-wise, if capital gains tax laws change (some proposals to tax endowments or unrealized gains, etc.), Bitcoin would be in same boat as other assets, so nothing uniquely threatening there beyond normal legislative risk.

Another regulatory risk is market regulation affecting liquidity – e.g., if the SEC were to disallow Bitcoin ETFs (not likely now, given approvals) or if global coordination aimed to suppress crypto usage. While possible, the mitigation is that Bitcoin is decentralized and global; even if one jurisdiction cracks down, others embrace it (e.g., China banned crypto trading, yet global markets shrugged after a while; meanwhile U.S. is embracing ETFs, and countries like El Salvador and Switzerland are very friendly). That diversification of jurisdiction means Bitcoin is unlikely to go to zero from regulation alone. But it could cause volatility (again tying to risk #1). If a severe regulatory blow occurred (say, a major country outlawing it), our oversight committee could reassess – is the thesis broken or is it a dip to look through? We’d rely on broad consensus of experts at that time.

We also mitigate regulatory risk by choosing compliant pathways: we will use regulated exchanges for any buying/selling (to avoid any legal issues), comply with KYC/AML on any transactions, and only trade in jurisdictions and with counterparties allowed by law (no dealing with sanctioned countries or exchanges with dubious legal status). This avoids the risk of UC inadvertently violating laws (like sanctions or anti-money laundering rules) which could happen if one used unregulated offshore platforms.

3. Cybersecurity and Custodial Risk: As discussed in Governance, theft or loss of the cryptographic keys is a critical risk. A malicious hack, internal fraud, or even accidental loss of keys could lead to irrecoverable loss of funds. Additionally, smart but malicious actors (including state-sponsored hackers) might see UC as a tempting target if it’s known to hold substantial crypto. There’s also the risk of software bugs in wallets or the Bitcoin protocol (though Bitcoin’s core protocol has proven very secure over time).

Mitigations: The detailed custody approach already mitigates much of this: multi-sig, multi-person control, offline storage, etc. To reiterate key points: no single person will ever have the ability to move funds ; keys are stored offline in secure locations (making remote hacking virtually impossible – an attacker would literally need to break into multiple physical safes in different places to get keys); and processes like whitelisting addresses can block unauthorized destinations. We will also ensure all machines used in transactions are clean and not connected to internet (to avoid malware risk).

Insider risk (fraud by an employee or collusion of insiders) is mitigated by multi-person requirements and oversight. We will background-check those given key responsibilities and perhaps bond them. Each key holder will sign a responsibility agreement acknowledging the sensitivity and legal ramifications of any mishandling. Also, because transactions are recorded on a public ledger, any unauthorized movement would be visible – we could immediately detect if something left the wallet that shouldn’t (unlike cash that could disappear without trace). This transparency is an asset; in fact, blockchain analysis tools could be set to alert us if any movement from our addresses occurs not during a scheduled authorized window.

We may employ “white-hat” hacking tests by consultants – e.g., have a cybersecurity firm try to test our physical and digital defenses (social engineering attempts on key holders, etc.) to identify any weakness.

On the protocol risk: there’s a remote possibility of a serious Bitcoin network failure or attack (51% attack, cryptographic break, etc.). We consider this highly unlikely given the network’s maturity and the amount of global investment in it. However, if it happened, likely the value would drop and we’d treat that as a scenario of thesis break – might cut losses if it’s irreparable, akin to divesting a stock that has a corporate fraud. But the risk is extremely low and we accept it as part of investing in any technology (there’s also risk of equity market crashes or bond defaults – different but analogous in unpredictability).

4. Operational Risk: This includes execution errors, process failures, or human mistakes not necessarily malicious (like sending funds to a wrong address, or failing to follow procedure in a crunch). If someone were to accidentally send Bitcoin to an address we don’t control (e.g., mistyping an address), it could be lost permanently. Also, managing a new asset requires training – there’s risk of confusion or miscommunication.

Mitigations: We will implement strict operational checklists for any transaction. For example, when transferring Bitcoin, use copy-paste of addresses or QR codes, verify the first & last several characters of the address with at least two people before confirming. We can send a small test transaction first (pennies worth) to confirm address correctness before a large transfer, a common practice. Using multi-sig with a custodian’s platform often includes user-friendly interfaces that reduce error (they may show “this is your saved address labeled UC cold storage” etc., avoiding manual address entry).

Training sessions will be held for all personnel involved, and we might start with a trivial amount as a dry run to practice the procedures in a low-stakes environment.

We will maintain redundancy in knowledge: more than one person knows how to execute the needed steps, so if someone is on leave or leaves the university, we don’t get stuck. That’s also why we prefer an institutional partner involvement.

Another operational risk is valuation and accounting complexities – but as noted, we will follow straightforward fair market value accounting each period. We’ll coordinate with auditors well in advance on how to audit the crypto holdings so that there is no last-minute issue at fiscal year-end.

5. Reputational Risk: This is discussed separately in more detail (Ethical/Reputation section), but to mention here: If the Bitcoin initiative is perceived negatively by some stakeholders (e.g., as too risky, or ideologically problematic), that could pose reputational damage or internal frictions. For instance, if the investment were to suffer a large loss, critics (media, politicians, some faculty) might lambaste UC for “gambling” with funds. On the flip side, not a risk per se, but if Bitcoin soared and UC benefited, reputationally it’s a win – but we must handle that humbly as well to not appear to be endorsing speculation over education.

Mitigations: We mitigate reputational risk by controlling the narrative and scope. Communication will emphasize that this is a small, prudent diversification akin to other alternative investments – not a pivot away from our core values, but a measured step to protect and grow the endowment for future generations . We also highlight the innovation and academic rationale, framing it as part of UC’s leadership in technology and finance, which can be a positive narrative. Internally, we’ll engage faculty (especially those knowledgeable in finance) early to get buy-in or at least understanding; their support or neutrality can temper potential faculty senate criticism. Externally, we ensure transparency in reporting results – if things go well, we share the success; if they go poorly, we share what we learned and how the impact is contained. The worst-case reputational scenario is a surprise loss that stakeholders hear about after the fact. We avoid that by early stakeholder engagement and ongoing updates.

Another specific reputational angle is environmental impact – some may criticize Bitcoin for its energy usage. We acknowledge this and are prepared to respond that the industry is moving toward greener mining (e.g., Bhutan mining with hydropower ) and that as a passive holder UC is not directly contributing to emissions any more than being invested in broad market (which includes many energy-intensive companies). Also, Bitcoin’s energy use relative to its market value and utility can be argued as efficient or at least improving. If needed, we could allocate a tiny portion of gains to buy carbon offsets or support sustainable energy research to counterbalance this critique (this could even be a feature: “UC’s Bitcoin fund will dedicate 2% of its annual gains to sustainability initiatives, aligning with UC’s carbon-neutral goals” – turning a critique into an opportunity).

Finally, benchmarking risk: we compare ourselves with peers. If every other university that tried crypto had disaster, we’d look bad doing it. But that’s not the case – so far, those who did (Emory, Harvard, etc.) are doing fine and in some cases seeing good returns . We will continually benchmark our performance and approach to ensure it stays in line with evolving best practices among institutions. If new information arises (say, a cautionary tale from another endowment’s experience), we will adapt accordingly rather than stubbornly sticking to a flawed path.

In conclusion, while the risks of Bitcoin are real, they are identifiable and can be managed through careful strategy. Our approach does not eliminate risk – no investment can – but it keeps risks within acceptable bounds. By limiting exposure, using strong controls, and planning for extreme scenarios, UC/UCLA can capture the potential benefits of Bitcoin while maintaining its financial stability and public trust. The risk/return profile of a small allocation to Bitcoin, given these mitigations, is actually quite attractive: the downside is capped (small portion lost in worst case), but the upside, if realized, could significantly contribute to UC’s mission. This asymmetry is why many institutional investors are warming up to crypto – they see that not having even a tiny allocation might be the bigger risk as the asset class matures . We will therefore proceed with confidence, backed by rigorous risk management discipline.

Implementation Pathways and Phased Rollout

Successfully integrating Bitcoin into UC and UCLA’s financial strategy will require a carefully phased implementation. We outline a roadmap with multiple pathways to acquire and grow holdings, engage stakeholders, and ensure a smooth adoption. The key principles are gradualism, parallel donor engagement, community involvement, and continuous evaluation.

Phase 0: Planning and Approvals (Months 0-3) – In this initial phase, we secure the necessary internal approvals and lay groundwork. This includes:

• Gaining Regents’ in-principle approval for exploring crypto investments (through a briefing at an investment committee meeting). Present research (some of which is summarized in this proposal) showing other institutions doing the same and how regulatory clarity has improved . Aim for a green light to proceed with a pilot.
• Similarly, get UCLA Foundation Board approval to accept and hold crypto gifts (if not already allowed). Many universities have updated gift acceptance policies to include cryptocurrency since around 2021; UCLA should do so explicitly if not done. Ensure the Foundation’s finance committee is on board with managing a Bitcoin fund.
• Develop detailed Investment Guidelines for the Bitcoin initiatives, for formal adoption. This covers target allocation, risk limits, custody approach, etc., basically formalizing much of what’s in this proposal into policy language.
• Line up the operations: select preliminary custodial partner(s) through either an RFP or by leveraging existing banking relationships. Perhaps big names like Fidelity or BNY Mellon, which handle some of UC’s assets, also offer crypto custody. Their familiarity with UC could speed onboarding. Alternatively, if a specialized firm is chosen, ensure they meet UC’s vendor requirements.
• Begin internal training: Identify the staff who will handle transactions or custody, and have them attend training sessions or even certifications (for example, some firms or organizations offer crypto asset management courses).
• Prepare communication plans and FAQs, anticipating questions from stakeholders. For example, be ready to explain “why Bitcoin?” with facts about its adoption and use as a hedge (like the U.S. policy to hold forfeited BTC as strategic asset ).

Phase 1: Pilot Acquisition (Months 3-6) – In this phase, UC executes a small pilot investment to test processes and demonstrate feasibility:

• Treasury Pilot: Allocate a nominal amount from UC’s Working Capital or Investment Pool to buy Bitcoin (for example, $500,000 – a trivial sum relative to UC’s $150+ billion in assets, but enough to test mechanics). This could be done via a reputable exchange or OTC desk under controlled conditions. For simplicity, the pilot could use the newly launched BlackRock iShares Bitcoin Trust ETF (IBIT) , which Harvard used. Buying an ETF share is operationally like buying any stock, so UC can do that to get initial exposure while the direct custody system is being finalized. Indeed, Emory and Brown started with ETFs . So, step 1 could be: invest $500k in IBIT through UC’s brokerage account. This gives UC immediate exposure and something to point to in reports, while parallelly, we prepare direct custody for actual BTC.
• Custody Setup: Work with the chosen custodian to set up an account/wallet, or if going self-custody multi-sig, generate keys with all appropriate people present. Do a dry run: perhaps deposit a tiny amount (0.01 BTC) into the new wallet, then attempt a withdrawal with the multi-sig process to ensure everyone knows the steps. Only after confirming the system works do we move larger amounts.
• Gradual Accumulation: With systems in place, accumulate the target amount of Bitcoin gradually. If the strategic reserve target is, say, $10 million, don’t buy all at once. Spread purchases over a period – e.g., buy $2M worth per month for 5 months, or algorithmically buy a fixed $ amount each week. This dollar-cost averaging smooths entry price. The purchases can be executed through an OTC broker who can source liquidity from multiple exchanges to minimize slippage. (Given Bitcoin’s liquidity, even $10M is not a large order by institutional standards and can be executed swiftly with minimal market impact if done smartly.) Each tranche acquired should be promptly transferred to the designated custody (cold storage).
• Donation Infrastructure: In parallel, set up the infrastructure to receive Bitcoin donations. This might involve creating a public-facing wallet address or partnering with a payment processor like BitPay or Gemini Giving Block. Actually, many universities use a third-party (The Giving Block, for instance) to handle crypto donations – they convert to fiat immediately by default. But for us, we want to hold donations as BTC. So we might still use their frontend but instruct them not to auto-sell, or more directly, simply publish instructions for donors: e.g., “contact us for wallet info” or integrate a widget for donating BTC. Initially, keep it simple: maybe designate a single wallet for UCLA’s crypto endowment donations.
• Soft Launch of Donor Campaign: Start outreach to a few key potential donors (perhaps alumni known to be crypto entrepreneurs or investors). Do this quietly to gauge interest. If ready, accept a first donation in Bitcoin. Publicize it selectively – e.g., a press release: “UCLA receives its first Bitcoin donation of 2 BTC to seed new endowment fund.” This can generate buzz and attract other donors. Indeed, when a university announces such a gift, others often follow. University of Austin’s announcement listed a donation of 2 BTC by Unchained’s CEO to kick off their fund  – that kind of story draws attention.
• Evaluation: After a few months, evaluate the pilot results. Are processes working smoothly? Did any issues arise in accounting or tech? Gather feedback from key holders, donors, etc. Report interim progress to Regents: e.g., “we have acquired X BTC at an average price of $Y, current value $Z, process has been secure and uneventful.” Early transparency builds trust.

Phase 2: Scale-Up and Full Implementation (Months 6-18) – With pilot successes, we expand the program:

• Increase Holdings to Target: Continue accumulating towards the strategic reserve target (if pilot didn’t already reach it). Possibly escalate if market conditions are favorable (e.g., if there’s a price dip, maybe accelerate purchases to capitalize on value – having a pre-authorized range for opportunistic buy could be beneficial). Also, if only an ETF was held initially, consider converting ETF shares to actual BTC holdings once the custody is ironclad (Harvard’s approach to use an ETF is fine long-term too, but direct BTC may yield more flexibility and avoid management fees).
• Formalize the Bitcoin Endowment Fund: Announce publicly the establishment of the “UCLA Bitcoin Endowment Fund” with an initial balance (combining any pilot donations and maybe a transfer of some funds from UCLA Foundation). This can coincide with a broader press release about UC’s overall initiative. Emphasize UCLA’s leadership and how this aligns with UCLA’s values of innovation. For system-level communications, emphasize UC Regents’ prudent management and how this move is moderate and future-oriented, not reckless.
• Major Donor Campaign: Launch a targeted campaign to alumni and donors. Potential tactics: Host an event or webinar titled “Bitcoin and the Future of University Endowments” featuring a panel with UCLA leaders and notable alumni in crypto, to drum up interest. Use success stories: e.g., mention that Emory’s crypto investment grew by 39% in a few weeks due to Bitcoin hitting all-time highs  to illustrate upside. Also highlight tax benefits (maybe with a testimonial from a donor who donated appreciated crypto and avoided a large tax bill). The campaign can use the tagline of innovation – e.g., “Join us in building UCLA’s endowment of the future. Donate Bitcoin to support UCLA’s mission for generations to come.” Provide clear instructions for donating, and recognize donors (perhaps create a new donor society tier for crypto donors).
• Alumni Engagement Activities: Work with UCLA Alumni Association to feature stories in newsletters or magazines about alumni involved in blockchain and UCLA’s Bitcoin fund. Possibly create an advisory Council of Blockchain Alumni to give guidance and also promote philanthropic involvement. The University of Austin partnered with the bitcoin community via events and guest lectures ; UCLA can do similarly, leveraging local tech communities (LA has a growing crypto scene, plus Silicon Valley not far). For instance, host a conference on campus about digital assets – showcasing UCLA’s fund as a case study – to which alumni and industry folks are invited.
• Integration with Academic Programs: By now, coordinate with faculty to integrate this into curriculum and research. Perhaps offer student internships or projects to analyze the crypto portfolio (under supervision). This is not only educational but provides extra sets of eyes and ideas on managing it. It also helps answer the question “How does this benefit academics?” by directly linking to student learning opportunities.
• Expand to Other UC Campuses (if desired): If this started as a UCLA pilot, evaluate interest from other UC campuses or the system-wide endowment. Perhaps UC Berkeley or UC San Diego might want to emulate for their campus endowments. The Regents might consider a system-wide adoption if UCLA’s goes well, or allow each campus foundation to opt in. We could convene a UC-wide task force to share best practices so each campus doesn’t have to reinvent the wheel. This is part of scaling up – moving from a pilot to an institutionalized program across UC.
• Monitoring and Rebalancing: Throughout this phase, closely monitor the market and the fund performance. If Bitcoin’s value grows significantly, we face a good problem of our allocation becoming larger than planned. For example, if we started at 1% of endowment and it doubles, it’s now ~2%. The oversight committee should decide if to rebalance (sell some to bring it back to 1%) or let it ride. There are arguments for both; many institutions would trim to manage risk (taking some profit), but others might treat it as a conviction holding. It will depend on context – at least consider taking out original principal after big run-up (house money principle). The key is to have these plans ready, so we act deliberately not impulsively.

Phase 3: Long-Term Management and Integration (Year 2 and beyond) – At this point, the Bitcoin holdings are a normal part of UC/UCLA’s asset mix. We transition into steady-state management:

• Ongoing Oversight: The committees meet regularly (e.g., quarterly) to review performance, address any new risks or opportunities, and consider incremental moves. For example, after some years, they might consider modest allocation increases if the asset has proven itself and as overall endowment grows (keeping percentage constant might mean buying more if endowment increased). Or if something changes (say Ethereum or another asset becomes similarly regarded as fundamental, they might consider adding a small allocation to that – but that’s a separate future decision).
• Reporting and Transparency: Include the crypto allocation in all standard financial reports. Perhaps create an annual report specific to the Bitcoin Fund for interested donors, highlighting what’s been achieved (e.g., “this year, thanks to growth in our Bitcoin fund, we funded 10 student research projects on campus…”). This will show tangible benefits and justify the experiment.
• Revisit Strategy if Needed: If over time Bitcoin becomes widely adopted in institutional portfolios (which it seems to be trending toward, with “institutional investors warming up” ), then UC’s strategy might shift from pioneering to routine management. Conversely, if Bitcoin disappoints (flat or down for many years), UC can reconsider – perhaps reducing exposure or exiting if it no longer appears to serve the objectives. The plan is not irrevocable; it should be reviewed like any investment strategy. That said, expect to commit for the long haul (at least one full market cycle ~4 years, preferably 10+ years).
• Scale and Diversify Funding Mechanisms: Consider broadening the donor base. For example, allow planned giving in crypto (some donors might include Bitcoin in their estate for UCLA, which requires capability to receive and hold later). Also, encourage corporate partnerships; maybe a crypto company would endow a chair or scholarship via a Bitcoin gift. UCLA could position itself as “crypto-philanthropy friendly,” which could attract significant contributions (some tech philanthropists have billions in crypto and are looking for credible institutions to support). UC Berkeley, for instance, auctioned NFTs of Nobel Prize patent documents to raise research funds  – UCLA could also experiment with such innovative fundraising (maybe NFT collectibles for donors).
• Coordinate with UC Investments (System): If UCLA’s fund thrives, the UC Office of the CIO might incorporate crypto in the overall UC retirement or endowment pools. In July 2025 it was noted that even large entities like sovereign funds and pensions (Wisconsin, Abu Dhabi) publicly invested in Bitcoin ETFs . UC’s Pension (UC Retirement Plan) is large and conservative; they might not jump in soon, but endowment could be a middle ground. We should be prepared if Regents decide to allocate a small piece of the system’s General Endowment Pool to Bitcoin – our pilot provides a template for how to do it.
• Public Leadership and Knowledge Sharing: As a successful case (assuming it goes well), UCLA/UC can publish whitepapers or host roundtables with other universities about this experience. This not only builds UCLA’s reputation as a thought leader but also strengthens the broader adoption (which indirectly helps our investment by legitimizing and increasing demand for Bitcoin). Essentially, UCLA could help define best practices for “crypto in endowments,” similar to how some universities led in private equity adoption decades ago.

Contingency Pathways: We also plan for alternate pathways if things don’t go as expected. For example, if donor interest is tepid and we don’t raise much in Bitcoin gifts, we can still proceed with the reserve strategy and consider allocating a small portion of existing endowment assets to Bitcoin to ensure we have skin in the game. Or if early on there’s a big market crash that scares stakeholders, we might pause further acquisitions and focus on education and reassurance, or re-size the plan to an even smaller pilot until confidence rebuilds.

Another scenario: say Bitcoin’s price skyrockets quickly (nice problem to have). We might then accelerate donor asks (taking advantage of excitement) but simultaneously secure some gains for the university – e.g., if value triples, maybe sell 10-20% to fund a quick win project (like a batch of scholarships or a building fund) to show the tangible benefit and lock some value. The oversight committee would handle this tactically.

Utilizing Gains (Implementation of Payouts): If by year 5 or so the endowment fund has grown, we execute the plan to use a portion for the university’s benefit. Suppose the fund doubled; we could skim off, say, 20% of the fund (leaving the rest invested) to endow a few professorships or provide student financial aid. Announce those outcomes – it’s important to demonstrate success to maintain support. For the strategic reserve, we likely wouldn’t “use” it unless needed (or unless converting some to endowment usage as hybrid model suggests). Possibly if reserves swell beyond a threshold, Regents might decide to transfer some to the endowment or to a rainy-day operating fund – but that would be a victory scenario decision.

Throughout implementation, flexibility and communication are crucial. We must be ready to adjust course based on feedback and results, without losing sight of the long-term vision. The phased approach ensures we learn and adapt on a small scale before committing larger resources. It also gives time for the community (donors, Regents, public) to get comfortable with the idea, turning initial skepticism into eventual acceptance and pride that UC was ahead of the curve.

In summary, the pathways to implementation are designed to be incremental, inclusive (bringing in donors and alumni at early stages), and reversible if needed. By Phase 3, the goal is to have Bitcoin seamlessly integrated into UC’s financial ecosystem, contributing real value to the university and managed with the same professionalism as any other asset class.

Ethical, Reputational, and Academic Alignment Considerations

Any major shift in investment strategy, especially one involving a sometimes controversial asset like Bitcoin, requires examining the ethical implications, reputational impact, and alignment with the institution’s academic values. Below, we address these considerations and how the proposed initiative navigates them:

1. Ethical Considerations:

• a. Social and Environmental Impact: One common ethical critique of Bitcoin is its environmental footprint. Bitcoin mining is energy-intensive, historically relying in part on fossil fuels. As a university committed to sustainability (UC has goals for carbon neutrality, etc.), supporting Bitcoin could be seen as tacitly endorsing an activity with high carbon emissions. We take this seriously. However, the landscape is evolving: a growing portion of Bitcoin mining is done with renewable energy or stranded energy (Bhutan’s sovereign mining uses 100% hydropower , and other miners use wind, solar, geothermal). Moreover, Bitcoin’s total energy use needs context – some studies find it’s comparable to the gold mining industry or the always-on electrical losses in the power grid, for instance. Regardless, the perception issue remains. To address this, UC can make clear that it is advocating for and supporting sustainable crypto practices. For example, UC could allocate some of the profits from the Bitcoin investment to fund sustainability research or carbon offset projects, effectively neutralizing its crypto carbon footprint. This could even be explicitly written: “In recognition of environmental concerns, UCLA will direct 5% of any realized gains from the Bitcoin Endowment to campus sustainability initiatives or green energy research.” Such a commitment would demonstrate that we are aware and proactive, potentially turning a criticism into a net positive (supporting clean tech). Additionally, we can join industry consortia focused on greening crypto (like the Crypto Climate Accord) to influence and ensure the crypto ecosystem aligns with global climate goals. Ultimately, as a passive holder of Bitcoin, UC is not directly causing emissions in the way a Bitcoin miner is; nonetheless, we will use our voice as an investor to encourage the network’s transition to renewables. If the environmental issue becomes a significant sticking point publicly, we are prepared to articulate these mitigation steps and emphasize that the university’s core values remain intact – we still prioritize sustainability and are using this initiative to further it (via funding and influence).
• b. Financial Ethics and Student Impact: Another ethical angle is the duty to steward resources responsibly. Some might argue it’s unethical or irresponsible to put university funds (especially donor gifts or public monies) into something as speculative as crypto. We counter that with the prudent approach we’re taking: very limited exposure, rigorous oversight, and a justification rooted in improving the university’s finances for the benefit of students and faculty. There’s an ethical imperative to explore opportunities that could significantly grow the endowment and thus provide more scholarships, research funding, etc., provided we manage risks – which we are. Essentially, the ethical case for doing this is that higher returns or diversification can protect the endowment’s spending power, helping fulfill the university’s mission (education, research) in the long run. In contrast, an overly conservative strategy that ignores innovation might fail to maximize resources for students – one could argue that is also ethically suboptimal. By framing it this way, we align the decision with our obligation to current and future stakeholders. We also ensure that no critical funds (like money needed for payroll or student services) are jeopardized – that would be unethical. Only surplus reserves and new gifts (with donor consent) are used, which respects ethical boundaries of not gambling with essential operational funds.
• c. Donor Intent and Transparency: Ethically, we must honor donor intent. If a donor gives Bitcoin to the endowment expecting us to HODL it, we will do so as promised . Conversely, if a donor to the general endowment might object to their fund being exposed to crypto, we can structure things so that traditional endowment pools remain separate unless a donor explicitly opts in or the Regents incorporate it broadly with full disclosure. The creation of a separate Bitcoin Fund actually helps ethically ring-fence: donors to that fund know exactly what they’re supporting, while donors who are uncomfortable can stay in traditional funds.

Transparency is crucial ethically: we will publicly disclose our Bitcoin holdings and performance in a clear manner. Keeping stakeholders informed prevents any sense of secrecy or impropriety. If losses occur, we will openly communicate what happened and why we still are within prudent expectations (for example, explaining “our 1% allocation lost half its value, reducing overall endowment by 0.5%, which is within normal annual fluctuations”).

2. Reputational Considerations:

• a. Innovation Reputation (Positive): On the positive side, this initiative can bolster UC’s reputation as an innovative, forward-thinking institution. It sends a message that UC is not a stodgy bureaucracy but rather a leader among universities willing to adapt to the 21st century financial landscape. We can harness this in PR: highlight that UC/UCLA is among the first public universities to do something that many will likely do in the future. There is evidence that “America’s top foundations and endowments were among the first institutional investors to embrace crypto”  (Yale, Harvard etc.), so we are in good company. Being an early adopter in academia could attract tech-savvy faculty and students; it might also get media profiles in outlets that cover innovation in higher ed. We should prepare to capitalize on that narrative – e.g., a UCLA Magazine feature on “UCLA in the Age of Crypto” detailing our research and financial initiatives could shape a positive image. This reputational benefit also extends to engaging our tech alumni – many in Silicon Valley or fintech might feel more proud of their alma mater for taking this step.
• b. Public Criticism (Negative): On the other hand, we anticipate some criticisms and must manage them. Potential critiques: “UC is gambling with public/endowment money”, “This is a distraction from education”, “What if it crashes – will tuition go up to cover losses?”, or ideological critiques like “Bitcoin is used by criminals, why is a university involved?”. We must address each:
  
  • Gambling critique: We respond that our allocation is very small and experimental – analogous to investing a tiny sliver in a venture capital fund, which endowments do all the time for high-risk/high-return potential. It’s not reckless; it’s calculated and monitored. We can cite how other respected universities have done similar moves, so we are not an outlier . Additionally, we frame it as diversification, not gambling: gambling implies random risk, whereas diversification is a sound portfolio practice to improve risk-adjusted returns. We have data to show that a small Bitcoin allocation historically would have improved the endowment’s performance (for instance, if UC had put 1% in Bitcoin 5 or 10 years ago, the returns would be higher – one could run that hypothetical). This rationalizes the move as prudent, not reckless.
  • Distraction critique: We clarify that this is primarily an investment management decision; it does not change the academic priorities or divert university focus. In fact, any time spent on it is to strengthen finances in support of our academic mission. However, the academic integration (discussed below) means it can also enhance education, so rather than a distraction, it could be an enrichment – students learning from a real institutional case. We ensure that key administrators are aligned so that the narrative from leadership is consistent: that this initiative is a small part of ensuring fiscal health and innovation, not a central preoccupation of the university.
  • Financial risk to students critique: Emphasize that no student tuition or essential budget depends on this. If Bitcoin vanished, it would not affect scholarships or operations because of how small it is and how we’ve segregated it (plus any donor-specific funds can only enhance, not take away from existing resources). If anything, success would provide additional scholarships, which is in students’ interest.
  • Criminal usage critique: It’s true early perceptions of Bitcoin were linked to illicit transactions. We respond with facts: Bitcoin has increasingly entered the regulated mainstream; major companies and governments hold it, and its blockchain transparency actually helps law enforcement (as noted, “agencies can trace illicit funds” on blockchain ). The asset itself is not “criminal”; it’s recognized by U.S. law and oversight. Also, UC’s involvement is completely above-board – buying through legal channels, complying with laws. We could also point out that many illicit actors use cash or other means too; that doesn’t taint cash as an asset class per se. Essentially, we distance from any stigma by highlighting regulation and adoption by clean institutions.
  • Ideological or political critique: Some might question alignment – e.g., Bitcoin can be associated with anti-establishment or libertarian views. UC as a public entity might get queries about endorsing that ethos. We clarify that we are agnostic to the ideology; we view Bitcoin as an investment and a technology of interest. Universities explore ideas – we already have faculty researching blockchain, etc. Holding some Bitcoin doesn’t mean UC endorses any political stance of some Bitcoin advocates (just as investing in yuan bonds wouldn’t mean endorsing Chinese monetary policy; it’s a financial decision). In fact, it demonstrates UC’s openness to studying and engaging with emerging technology critically and pragmatically.
• c. Reputational Safety Measures:
  
  • We will proactively communicate this initiative in our branding and PR in a balanced way. Perhaps accompany the rollout with endorsement quotes from respected figures: e.g., a UCLA Anderson finance professor (hopefully one supportive) can state this is a prudent small bet that could pay off in portfolio terms. We noted one UCLA finance professor was initially skeptical about Bitcoin for endowments ; perhaps over time with more adoption, opinions might moderate. If not, we can still acknowledge skepticism, showing we considered it and still decided the potential merits outweigh the concerns, illustrating due diligence.
  • Manage external media: For instance, if media try to spin it sensationally (“UCLA Bets on Bitcoin”), ensure our spokespeople emphasize the careful, small-scale nature and the broader context of many institutions adopting crypto now. We can reference the Financial Times report that many institutions are joining out of fear of missing out  – i.e., we’re not alone or crazy, we’re part of a growing trend among prudent investors.
  • Monitor public opinion and be ready to adjust messaging. If, say, student groups voice concerns (maybe about climate or risk), engage them in dialogue. Possibly show them the steps we’ve taken (e.g., if we do allocate some gains to sustainability, that could quell environmental criticisms).
  • Highlight successes: As soon as there’s something positive (like first scholarships funded from crypto profits, or even just the fact that Harvard and others have followed similar path), publicize that. We saw Harvard’s large Bitcoin ETF buy made news ; if the likes of Harvard and Yale are doing it, that in itself reduces reputational risk for UC because it becomes seen as mainstream prudent practice rather than fringe.

3. Academic Alignment:

A core question: How does this align with UCLA’s and UC’s academic mission and values? We want to ensure this initiative supports, or at least doesn’t conflict with, the university’s educational and research goals.

• a. Research and Teaching Synergy: UCLA has significant strength in fields like computer science, economics, law, and public policy – all of which are now examining cryptocurrency and blockchain technology in various ways. By having a Bitcoin fund, UCLA can provide a living laboratory for interdisciplinary study. For example:
  
  • Finance and Economics faculty can study the asset’s role in portfolios, perhaps producing academic papers on the performance of crypto in institutional investing (there’s already burgeoning literature on this; UCLA can contribute real data from its own experience).
  • Computer Science and Engineering researchers focusing on blockchain can collaborate, maybe using a portion of the endowment to test certain smart contract use cases (not with the actual endowment funds, but say by simulating or interacting with the ecosystem). Also, if UCLA holds crypto, it might motivate infrastructure like running a validating node or supporting network research, which could be an academic project itself.
  • Law and Public Policy scholars could examine the regulatory and governance aspects of what we’re doing, possibly writing case studies or advising government based on our model.
  • UCLA could incorporate content about crypto in curricula – which many schools are doing. As cited, UoPeople is integrating crypto and blockchain content for all students . UCLA can similarly bolster its curriculum, and being an active participant (not just teaching theory, but actually holding and dealing with crypto) gives practical insights to share with students.
  • There could be student projects or competitions related to the Bitcoin fund. For instance, a student group might be tasked with making recommendations to the oversight committee (as University of Cincinnati did with students advising a crypto fund ). This kind of experiential learning is highly valuable and differentiating. UCLA’s Anderson School could run a case competition on crypto endowment management, again turning this into an educational resource.
  • UCLA might host academic conferences or speaker series around cryptocurrency. Already, blockchain and digital currency are hot topics in academia (MIT, Stanford, etc., have centers and conferences). UCLA could leverage the publicity of its crypto fund to attract notable speakers or grants (for example, from crypto foundations for research). The partnership and engagement with the bitcoin community mentioned in UATX’s example (guest lectures, etc. ) is something UCLA can do at larger scale given our location and alumni network.
• b. Alignment with Mission and Values: UCLA’s mission is to create, disseminate, preserve, and apply knowledge for the betterment of our global society. Engaging with Bitcoin aligns with creation and application of new knowledge in financial innovation. It shows UCLA is not insular but interacting with the real-world evolution of technology and finance. This can better prepare students for the modern economy (financial literacy now arguably includes understanding digital assets). The betterment of society aspect can be addressed by framing how blockchain might have positive social impacts (financial inclusion, etc.), topics which could become part of UCLA’s discourse. We can, for example, fund research or student projects on using blockchain for social good (maybe the endowment yields could support a small grant for that).

UCLA also values inclusivity and diversity. One might question, does focusing on crypto detract from that? Possibly not – the donor engagement piece could bring in new diverse donors (crypto wealth is global, inclusive of younger and more diverse individuals than some traditional donor bases). Accepting crypto might attract donors who felt alienated by old-school fundraising. And if the crypto fund grows and supports scholarships, it can directly increase educational access (imagine crypto-funded scholarships for underrepresented students in tech – that would be a nice narrative of crypto benefiting diversity in STEM).

• c. Student Attitudes: Many students are very aware of crypto; some might own some or be skeptical, but it’s a prevalent topic. If UCLA takes a lead, it likely will be popular with students who view it as the university being modern. A potential misalignment could be if a majority of students think it’s a bad idea – but we suspect a good number will be excited or at least intrigued. It might be valuable to involve student representatives in the oversight process in some capacity (perhaps a student from the finance club sits in on some meetings, or student government is briefed). This inclusion demonstrates we consider student voice in major decisions, aligning with shared governance values.
• d. Upholding Academic Freedom and Neutrality: As a public university, UCLA must remain politically neutral and academically unbiased. Bitcoin can be polarizing politically (some see it as anti-government currency, etc.). By treating it purely as an asset and a research subject, we maintain neutrality. We aren’t, for example, using it to make a political statement about the Federal Reserve or such – and we should be clear on that if asked. It’s analogous to how universities might hold foreign currencies or commodities; it doesn’t signal endorsement of any ideology tied to those. Academic freedom means faculty and students can criticize or praise crypto as they see fit; the institution holding some doesn’t silence or endorse particular viewpoints beyond the financial rationale.
• e. Precedents in Academia: It’s notable that a number of universities have begun integrating crypto academically: MIT had a Digital Currency Initiative, Stanford has blockchain research, University of Nicosia offers degrees in blockchain, etc. UC’s venture into holding crypto complements such trends. We might consider interdisciplinary initiatives at UCLA – for instance, establishing a Center for Digital Finance and Innovation partly funded by the Bitcoin Endowment’s returns. This would solidify academic alignment: tying the financial investment to a hub of learning and research in the domain. That way, the investment not only grows money but also seeds knowledge production, which is the ultimate mission. Even UoPeople (small, online) took steps like NFT diplomas and accepting crypto fees as part of the same initiative   – indicating they saw synergy between financial and educational innovation. UCLA, with far greater resources, can do even more on that front.

In conclusion, we find that with mindful planning, the Bitcoin initiative can be made ethically sound, reputationally advantageous, and academically enriching. The keys are transparency, consistency with UC’s values (innovation, sustainability, prudent management), and making sure the academic community benefits from and participates in the endeavor. By addressing environmental concerns proactively, using the opportunity to bolster our educational offerings, and communicating the prudent intent behind the move, we can turn potential criticisms into points of pride. We will continually engage with our community – faculty, students, alumni – to ensure this effort complements UCLA’s broader goals of excellence and public service. Done correctly, the move will not just be an investment footnote, but a catalyst for scholarly and philanthropic growth at UCLA.

Benchmarking Peer Institutions and Analogous Holdings

Although the concept of a university-held Bitcoin reserve or endowment fund is relatively new, we can draw on a number of peer examples and analogous cases to inform our proposal. Both private and public institutions have begun wading into crypto in various ways. This section will highlight those benchmarks and the lessons we glean from them:

1. Universities Investing in Bitcoin or Crypto Funds:

• Emory University (Private, Georgia): Emory became the first major U.S. university to publicly disclose a direct Bitcoin position in its endowment (late 2024) . Emory’s $11B endowment reported holding ~2.7 million shares of the Grayscale Bitcoin Trust (GBTC), worth about $15 million at time of filing . By November 2024, as Bitcoin hit all-time highs, that stake’s value jumped 39% to over $21 million . Implication: Emory’s case proves that large endowments can and have gained exposure via existing vehicles. It also shows the near-term benefit – they saw significant appreciation, reinforcing the inflation-hedge narrative as that period corresponded with inflation and market volatility. It being the first public disclosure suggests that others might have exposure but haven’t had to disclose (perhaps via private funds under reporting thresholds). Emory’s CIO commented that once GBTC became an ETF, it triggered transparency . Lesson: Use of ETFs for ease – Emory’s approach kept things simple on custody. We might similarly start with an ETF for initial exposure, then consider direct BTC.
• Brown University (Private Ivy, Rhode Island): Brown’s endowment (~$4.7B) was noted to own 105,000 shares of BlackRock’s spot Bitcoin ETF (IBIT) as of spring 2025, valued around $4.9 million . Reports indicate Brown nearly doubled its stake by mid-2025 to ~$13 million . Implication: Another Ivy League adopting Bitcoin exposure, albeit at a small scale (~0.1-0.3% of endowment). This signals Ivy endowment managers see it as a legitimate diversifier. Brown used BlackRock’s fund, meaning they trust the regulatory-approved instrument. Lesson: Peer acceptance is growing. UC can comfortably say that at least two Ivies (Brown, Harvard) and a major private (Emory) are doing this, so it’s within prudent norms. Also, using top-tier fund providers (like BlackRock) lends institutional credibility to the approach.
• Harvard University (Private Ivy, Massachusetts): Harvard’s endowment (~$53B) made waves in Q2 2025 by purchasing $116.7 million worth of the iShares Bitcoin Trust ETF . That made it one of HMC’s top five holdings in that quarter. They also bought gold ETFs simultaneously , framing it as a shift amid inflation concerns. Harvard’s move is particularly notable due to its size and influence. It was reported by their student newspaper and others, including remarks from professors – e.g., one professor cautioned it’s speculative, while another said it reflects Harvard’s increased risk appetite  . Implication: If the richest university is putting serious money in (over $100M is not trivial), it legitimizes the asset for all endowments. It signals that crypto has matured to the point where even the most prestigious institutions find a place for it. However, Harvard did it via an ETF and still faced internal skepticism as per faculty quotes. Lesson: Even large allocations are possible, but expect debate. We see value in how Harvard communicated it: they linked it to inflation hedging (store of value narrative) , which is a respectable macro rationale. We can similarly anchor our messaging in economic rationale rather than techno-utopianism. Also, Harvard balancing it with gold in the same breath gave it more legitimacy (pairing a new hedge with the classic hedge).
• University of Texas/Texas A&M (Public, Texas): While not directly holding Bitcoin in reserves, University of Texas’s endowment (UTIMCO) reportedly invested in venture funds that back crypto as early as 2018. More recently, there have been discussions in Texas about endowments or even state funds taking Bitcoin positions (given Texas’s crypto-friendly stance). Specific data is scant, but the atmosphere is that some public university systems have become open to crypto indirectly. Implication: We’re not alone among public entities considering this. In fact, a notable public analog is public pension funds – e.g., the Wisconsin pension buying Bitcoin ETFs . If a public pension can do it (pensions are usually very conservative), a public university endowment can too. The State of North Carolina’s pension also discussed allocations . Lesson: Public fiduciaries can invest in Bitcoin under proper oversight. It sets precedent that it’s legal and acceptable with prudent sizing.
• University of Cincinnati (Public, Ohio): A unique case, as discussed earlier, is UC’s donor-funded crypto investment that students help manage (small scale $50k pilot)  . It’s not about reserves but about integrating into education. However, it shows public universities experimenting in different ways, in this case educational trust in crypto. Lesson: Educational integration works. We can cite this as an example of positive student outcomes from crypto endowment.

2. Universities Accepting Crypto Donations and Building Crypto Funds:

• University of Austin (Private, Texas – new institution UATX): In 2024, UATX announced a $5 million Bitcoin endowment fund, aiming to be the first to hold an endowment in BTC . They partnered with Unchained Capital, got a 2 BTC donation to start, plan a five-year hold  . Implication: UATX is a very new, non-traditional university, but they set a precedent explicitly branding a “Bitcoin Endowment.” They highlighted mission alignment and building ties with the Bitcoin community  . For us, it’s a proof of concept that such a fund can be launched and marketed successfully (it garnered media attention in both crypto and higher-ed circles). Lesson: Framing and partnerships matter. UATX framed it as forward-thinking and values-driven (sound money principles, etc.) , which appealed to their target supporters. UCLA/UC would frame differently (more emphasis on diversification and innovation), but seeing how they did it helps. They also show that a third-party custody partner is eager to help (Unchained donated custody services)  – perhaps we can leverage service providers similarly (they might give us discounted or sponsored custody for the publicity of having UC as a client).
• University of the People (Private online, California): UoPeople in 2021 claimed to establish the “world’s first cryptocurrency endowment fund” seeded with $2 million of crypto donations  . They also integrated crypto into operations (accepting fees, NFT diplomas). Implication: This small, innovative university used crypto as part of its identity. They got a major donation from a known venture capitalist (Albert Wenger) to kickstart it . They are much smaller than UCLA, but their bold move shows even in 2021, forward-looking donors were willing to fund crypto endowments. It might not be a large endowment (target $10M ), but it’s working for their model. Lesson: Donor appetite exists for crypto-specific endowments. The fact that UoPeople could find $2M in donors right away suggests at our scale, tapping just a few wealthy crypto alumni could net much more. Also, UoPeople tying it to tuition-free education and “currency of the future” narrative  gave a mission-driven spin. We can craft a narrative for UCLA that suits our public research mission – perhaps “supporting the next generation of tech leaders” or similar.
• Penn/UC Berkeley NFT fundraising: Both University of Pennsylvania and UC Berkeley dabbled in NFTs in 2021, auctioning digital assets tied to research to raise money . Penn’s was images from patents, Berkeley’s was a Nobel-winning invention NFT . They raised relatively modest funds (~$50k to $100k if recall). Implication: These are one-off, but they show schools experimenting with blockchain-based fundraising. Berkeley’s case was instructive because as a public university they navigated selling an NFT of intellectual property successfully and generated headlines for it. Lesson: Public interest in novel crypto fundraising can boost reputation and funds, even if amounts are small. It underscores that UC Berkeley’s leadership wasn’t opposed to engaging with crypto; indeed, they leveraged it for research funding. So within UC system there is precedent of crypto involvement for positive outcomes.

3. Sovereign and Corporate Strategic Reserves (Analogies):

• Nation-State Reserves: El Salvador famously made Bitcoin legal tender in 2021 and holds Bitcoin in its treasury. More relevantly, as referenced earlier, the U.S. Strategic Bitcoin Reserve was established in 2025 (by executive order) for seized BTC . And Bhutan quietly accumulated Bitcoin through mining as part of sovereign wealth strategy . Implication: The concept of a “strategic reserve” is in play at national levels. The U.S. decision is telling – instead of auctioning seized BTC (which they always did before), they now hold it for the nation’s long-term benefit . That closely parallels what we propose for UC (instead of cashing out everything, hold some strategically). If questioned why a public institution should hold Bitcoin, we can cite these sovereign cases: “If it’s sensible enough for the U.S. Treasury and other countries to hold as a reserve asset, UC should also consider it.” Lesson: Legitimacy from government adoption. We can use these examples in discussions with regents or officials to show it’s not unprecedented for public entities to view Bitcoin as strategic. Also, we note that the U.S. plan was “budget-neutral” (only using seized BTC, not buying new with taxpayer money)  to avoid political fallout. Our approach of using donor funds or surplus funds echoes that – we avoid using core taxpayer funds.
• Corporate Treasuries: Companies like MicroStrategy (rebranded as “Strategy” in Reuters piece ) and Tesla have held Bitcoin as a treasury reserve. MicroStrategy, in particular, made it its primary reserve asset and its stock became a proxy for Bitcoin (their shares soared beyond BTC’s performance due to leveraging that strategy ). Implication: While corporations are different from universities, the rationale (“replace cash that’s depreciating with Bitcoin that has upside”) is a similar strategic thought. The difference is corporations answer to shareholders, we answer to stakeholders like regents and the public. Corporate experiences show that such a strategy can yield high returns but also stock volatility. Not all companies followed suit, but enough did to consider it a known strategy. Lesson: Cautionary note on volatility and perception: Some corporate adopters faced stock volatility and mixed reactions; similarly, we should be prepared for some internal dissent or external skepticism. But over time, corporate adoption (including now presumably more through ETFs as Reuters notes ) has normalized Bitcoin as an asset for treasury diversification. Also, MicroStrategy’s approach of issuing debt to buy Bitcoin  is extreme; we are not doing anything of that sort (we’re not borrowing to buy Bitcoin), which we can point out to differentiate and reassure (we are using existing assets and new gifts only).

4. Endowment Performance Indicators:

It’s worth noting some data: a 2022 Fidelity survey (if available) indicated increasing interest among endowments and foundations in crypto. By 2025, as Pymnts and FT reported, many endowments are jumping in so as not to “be left behind” . Pantera Capital (a crypto VC) saw an 8-fold increase in endowment clients since 2018 . Yale’s endowment invested in crypto funds as early as 2018 , which many saw as a stamp of approval from famed CIO David Swensen. So, while direct holdings like Emory/Harvard are new, indirect exposure via VC funds has been around for a few years among the top endowments. And no major backlash or regret has been publicized about those moves, implying they likely have performed well (especially those who invested in 2018 or 2020 when prices were much lower – they likely reaped significant gains).

5. Peer Institutional Attitudes:

We should also benchmark attitudes of similar public universities: Perhaps reach out informally to colleagues at other large public university endowments to gauge if they’re considering crypto. It’s possible UC will be among the first big publics to do it openly, which is fine. We can become a leader and model for others. If none have publicly done it yet, that increases the reputational reward if we succeed, but also means we carry the mantle with extra care.

6. Other Crypto Holdings in Academia:

Beyond Bitcoin, some universities have been involved with crypto in other ways:

• MIT and Stanford have reportedly held some crypto (possibly through donations or mining experiments) in labs.
• Smaller colleges have received notable donations: e.g., Wharton (Penn) got a $5M Bitcoin gift for a blockchain program in 2021 (which they liquidated to fiat immediately, but it shows donors of that size exist).
• There was a famous early gift: In 2014, the University of Puget Sound got 14.5 BTC from an alum , which they actually held for a while I believe – by 2021 that was worth much more (the cryptoforinnovation article noted it would be $68k from $10k) . That story can be used to illustrate the potential growth from holding vs selling donations. Many schools historically sold donated crypto immediately – had they not, some would have millions more. For example, if Puget Sound held those 14.5 BTC from 2014, by 2024 they’d be ~$14.5*50k = $725k (just a rough estimate), whereas if they sold at $10k total then that’s all they got. We can highlight such missed opportunities to justify holding strategy.

Summary of Benchmarks/Lessons:

• Legitimacy: Multiple top-tier universities (Harvard, Yale, Brown, etc.) and respected institutional investors (pensions, foundations like Rockefeller ) are now on board with crypto investment. This gives UC cover to proceed without seeming rogue.
• Scale: Most are starting small (fractions of a percent of AUM). This reinforces our approach to keep initial exposure modest.
• Method: Many use ETFs or funds for simplicity and to outsource custody (Harvard, Brown, Emory all did). We can do likewise initially, but we also have the capacity to custody directly if beneficial. The ETF approach also indicates regulators (like SEC) are comfortable enough to approve such funds, adding regulatory blessing to the asset’s integration.
• Donor Engagement: The existence of crypto-specific endowments (UATX, UoPeople) and big crypto gifts (Penn, USC, etc.) shows donor interest that we can tap. There is a community of crypto wealthy individuals looking to donate; being known as a crypto-forward university can attract those gifts (like how naming opportunities in tech buildings attract tech donors).
• Security & Governance: None of the public examples have reported security issues – of course, universities that held via ETFs avoid that by not holding private keys. Those doing direct (like UATX) partnered with custody providers, a wise move we are emulating. Also, no known legal challenges or regulatory issues have arisen from these universities holding crypto, implying it’s been smooth legally as long as they followed procedure.
• Public/Media Reaction: Emory’s and Harvard’s moves were covered in media neutrally or even positively (with quotes from finance professors giving balanced views) . There wasn’t any scandal or significant backlash reported. This suggests that the narrative is shifting to acceptance – media focus was on “Harvard goes big on Bitcoin and gold” as a notable shift but not “Harvard irresponsibly gambling.” The presence of inflation context and pro-crypto federal policies (the Crimson piece even mentions the Trump admin’s crypto push including Strategic Reserve)  probably contextualized it as a rational move.
• Performance: While short-term, Emory and Harvard likely have gains from their entry (Bitcoin in late 2024/early 2025 was rising to new highs). That can build confidence. If by the time we implement, Bitcoin is on an upswing, we might similarly enjoy a “timing luck” that yields quick initial gains, which would help silence critics. We can’t count on that, but interestingly many who started around 2020-2021 and held through 2021 saw significant appreciation before the 2022 bear – the timing can be volatile, but long-term believers still are up dramatically from earlier years.

Using these benchmarks, we will craft our detailed implementation and communications to mirror what worked and avoid what didn’t:

• Lean on the fact that “X and Y universities have done this too” when explaining to regents or press.
• Perhaps reach out to Emory’s or Harvard’s investment office informally to learn from their experience (not public info, but industry contacts might share perspective).
• Use donors’ language: e.g., Rockefeller’s CIO quote “we don’t want to be left behind”  is powerful – we can incorporate that sentiment to appeal to fear of missing out on a technological shift.
• Highlight that our strategy uses the best of others: like Harvard, we’re investing due to macro hedging reasons; like Emory/Brown, we might use secure fund structures initially; like UATX, we’re partnering with experts for custody; like UoPeople, we’re integrating it into our educational mission.

Benchmarking shows we would be among the first public universities to do a comprehensive Bitcoin reserve + endowment, making this a leadership opportunity. It’s a chance for UCLA and UC to set a standard that others may follow. As evidence, if our initiative succeeds, it would not be surprising to see peer public schools (Michigan, Texas, etc.) announce similar moves given they often observe and copy good practices in endowment management. Thus, we should design our program to be a model – well-documented, transparent, and prudent – so it can become a case study for others. This will only further enhance UC’s reputation as a pioneer in the space.

Tailoring the Proposal to UCLA Leadership and UC Regents

It is important to recognize the distinct perspectives and decision criteria of UCLA campus leadership and the University of California Board of Regents. While there is overlap, each has unique priorities. Below we outline how to tailor our arguments and presentation to address each audience’s concerns and objectives:

A. Presentation to UCLA Leadership (Chancellor, Executive Vice Chancellor, UCLA Foundation Board, Deans):

Focus: UCLA leadership will be interested in how this initiative benefits UCLA’s campus, its students and faculty, and the university’s stature. They will also care about managing any risks at the campus level and ensuring alignment with UCLA’s strategic plan.

• Campus Financial Benefits: Emphasize how a Bitcoin endowment fund can bolster UCLA’s financial aid, research, and innovation budgets over time. For instance, project a scenario: “If this fund had been in place 5 years ago with $1M, today it could be worth roughly $X (assuming historical BTC growth), which could endow Y number of scholarships or fund Z new faculty positions.” Show that upside with limited downside to illustrate the potential direct benefit to UCLA’s core activities. Also highlight any immediate benefits, like new donations that otherwise might not come. For example, “We are in conversations with alumni in the tech sector who indicated they would contribute to UCLA if we have the capability to accept and hold crypto gifts.” This creates a sense that UCLA stands to gain new resources by being prepared to engage these donors. If we have identified a likely donor or two (perhaps a successful Bruin in the crypto industry), mentioning that (with discretion) can be persuasive.
• Academic and Research Alignment: UCLA prides itself on research excellence. We tailor the message to say: “This initiative isn’t just an investment; it’s an opportunity to further UCLA’s research and teaching mission. We can integrate it with the UCLA Blockchain Lab (or relevant groups), create student learning experiences, and possibly use some proceeds to fund a UCLA Center for Cryptocurrency and Society, positioning UCLA at the forefront of research in this domain.” By framing it as an interdisciplinary boon (finance, engineering, law, etc.), we appeal to the academic values. UCLA leadership will respond well to anything that enhances curriculum or research competitiveness. For instance, mention how other top schools (MIT, Stanford) have advanced crypto programs, and that this financial commitment underscores UCLA’s seriousness in this area, helping attract top talent.
• Innovation and Reputation for UCLA: Campus leaders are often looking for ways to boost UCLA’s prestige and distinctiveness. Argue that UCLA can become known as one of the first major universities to have a crypto-denominated endowment, which resonates with UCLA’s image as a cutting-edge, entrepreneurial institution (especially with our proximity to Silicon Beach and history of internet technology — recall UCLA was instrumental in ARPANET; connecting that legacy to blockchain as a new network technology could be a compelling narrative). Quote perhaps a positive media snippet or comment about UATX or Emory to show the kind of press UCLA might get. E.g., “When Emory disclosed its Bitcoin holdings, it was covered positively as a forward-thinking move . UCLA taking an even bolder step would likely garner national attention, highlighting our leadership among public universities.”
• Risk Mitigation Emphasis (Campus level): UCLA leadership will be risk-averse regarding anything that could negatively impact the campus budget or invite criticism. So reassure them: “This will not affect UCLA’s operating funds or general endowment payouts in any adverse way. The scale is small and ring-fenced. If Bitcoin’s price collapsed, UCLA’s core budget would feel no pain because we’re only using either new gifts designated for this or a tiny portion of reserves that are not allocated to current needs.” Also explain the governance: how UCLA Foundation (if that’s the entity holding the fund) will partner with UC’s experienced investment office for oversight, and how multi-sig custody prevents any kind of loss or misuse. They need to feel that campus isn’t taking on uncontrolled risk. It may help to propose forming a small UCLA advisory subcommittee (including perhaps a dean of Anderson School, a tech-savvy faculty, etc.) to monitor the campus-specific part. That shows inclusive governance and that domain experts on campus will have eyes on it.
• Donor/Alumni Engagement (Campus): UCLA’s leadership, especially in development, will be enthusiastic if this helps fundraising. Emphasize that “this opens up a new donor demographic for UCLA.” Possibly reference USC’s Keck School receiving a $1.1M crypto gift  or Penn’s $5M gift – implying UCLA might capture similar or bigger gifts by being ready. If known, mention any UCLA alumni in crypto who could be big donors (maybe hint, “We know of at least X Bruin alumni who were early at Coinbase, Ripple, etc., who have expressed interest in giving back in crypto form.”). Also stress that younger alumni (Millennials, Gen Z) are much more involved in digital assets , and this initiative signals to them that UCLA speaks their language, which could encourage engagement and giving among the next generation of donors. The UCLA Foundation board, made up of business and community leaders, might actually be quite intrigued at being at the vanguard of a new investment approach – but they will need assurances that it’s managed professionally.
• Local Context: UCLA leadership will consider the UC Regents’ stance but also the local campus context. UCLA specifically might consider how this aligns with UCLA’s strategic priorities (say, “maximizing resilience and resources” or “advancing impact through innovation”). We tailor language to those strategic plan goals if possible. Also, if UCLA already has any blockchain initiatives (like a student club or minor program), we mention how this supports them. If not, perhaps propose starting one – leadership might like that this investment would be a catalyst to developing new academic offerings in fintech/blockchain, keeping UCLA competitive academically.

In summary, for UCLA leaders the pitch is: “This is a low-risk, high-upside move that could bring new money and educational opportunities to UCLA, keeping us innovative and ahead of the curve, without jeopardizing any existing priorities. We will manage it carefully and it will enhance UCLA’s profile and resource base.”

B. Presentation to UC Regents (System-wide Governance):

Focus: The Board of Regents (and the UC Office of the President/Chief Investment Officer) will approach this from a system perspective: fiduciary duty, policy precedent, public accountability, and comparisons to other system investments. They will be sensitive to any political fallout and will scrutinize risk carefully.

• Fiduciary Framing: We open with how this aligns with their fiduciary duty to preserve and grow endowment assets for the benefit of the university’s mission . Use language from UPMIFA/prudent investor concepts: diversification, prudent risk, long-term horizon. E.g., “Under the prudent investor rule, considering a small allocation to a non-traditional asset like Bitcoin is permissible and can be prudent as part of a diversified strategy . We have evaluated this thoroughly and believe a modest allocation could improve the portfolio’s risk-adjusted returns, thereby strengthening UC’s financial footing for the future.” Emphasize that we will abide by all legal and ethical guidelines (maybe even mention we consulted with counsel or investment consultants who supported the approach – if we have such backing).
• Peer Comparison and Legitimacy: Regents will want to know, “Are other big institutions doing this? Are we going out on a limb?” Provide them the evidence: Harvard’s $117M investment , other universities like Emory , pensions like Wisconsin , and even nation-states (the US Strategic Reserve) . State that “UC would not be the first, but it would be the leader among public university systems.” That appeals to the competitive nature of UC to be forward-thinking like the Ivies. Also mention that some UC campuses (Berkeley) have engaged with crypto in fundraising (like the NFT) – showing that parts of UC have already forayed into this with positive outcomes .
• Risk Controls and Scale (System view): The Regents will care about protecting the overall UC portfolio ($160+ billion including pensions). They will appreciate that our plan is very limited in scope relative to that. For example, if we propose 0.5% of the General Endowment Pool (~$1-2B? Actually UC GEP was around $19B in 2021, likely over $20B now, so 0.5% ~ $100M) or perhaps a pilot smaller. Show scenario analysis: “If we allocate 1% of UC’s endowment to Bitcoin and worst-case it loses 50% in value in a year, that is a 0.5% impact on endowment – which is within normal annual fluctuations and would not materially hurt funding.” Conversely, “if it gains 300%, that 1% becomes 3% of endowment, which could add a percentage point or two to overall endowment growth, benefiting campuses.” They’ll likely be okay with a small asymmetric bet if framed as such.

Also reassure them about liquidity: endowments need liquidity for payouts; Bitcoin is liquid enough for a small slice, and we are not locking money away (unlike some private equity where money is tied up for 10 years; here, if needed, we could liquidate in days). So in some ways, it’s more liquid than other alternatives they already use (some Regents may not realize that – pointing it out helps mitigate their concern that it’s an illiquid speculative thing).

• Regulatory and Oversight: The Regents will worry about oversight and public perception. Outline the governance: “The UC Investments Office, which already manages complex assets, would manage this in-house in accordance with updated investment policy. We would have regular reporting to the Investments Committee. Additionally, we propose forming an advisory group including regents or external experts to guide the implementation, ensuring robust oversight.” By involving Regents in the oversight (maybe one or two Regents with tech background could champion it), they feel more control. Also highlight “clear accounting and auditing procedures will be in place (potentially one of the big firms can audit our crypto holdings easily).” If we mention that the Trump Administration and Congress have clarified crypto regulation and accounting , it implies the compliance landscape is solid for institutions now, so UC wouldn’t be sailing into a grey area; it’s more black-and-white permitted now.
• Public/Treasurer/Legislative Optics: Some Regents (especially political appointees) will consider how this looks to the public or state government. Address that: “We plan to be transparent and proactive in communications. We will emphasize that no state funds or tuition dollars are being risked – only a small portion of endowment (which is donor-funded) or other non-essential reserves.” Also, note that the UC Treasurer (CIO) and investment team support this after careful study (assuming we have their backing) – i.e., it’s a professional investment decision, not a whim. Possibly reference that not doing so also has a risk (the risk of missing out on an asset class that could strengthen UC’s finances). We might volunteer to brief the State’s oversight (like the Assembly or executive branch) to answer any questions, demonstrating confidence and nothing to hide. The more we show we’ve thought of potential political criticisms (like “is this the right use of public trust funds?”) and have answers (like “yes, because it helps ensure the long-term growth of scholarship funds, etc.”), the more comfortable Regents will be.
• Alignment with Regents’ Goals: The Regents often have stated goals for the endowment: e.g., achieve a certain return target, promote innovation, sometimes even social responsibility aspects. We tie into that: “Bitcoin’s inclusion is projected to modestly increase our expected return for a given level of risk (improving Sharpe ratio), aiding in meeting our payout obligations to campuses . It is also a signal that UC supports technological innovation in finance, aligning with our role as a leading research institution.” If any Regent is known to be tech-savvy or crypto-friendly, engage them prior to formal meetings to get them on board as an advocate in the room.
• System vs Campus Responsibilities: Clarify what decisions Regents need to approve vs what can be done at campus/foundation level. Possibly propose a dual approach: “We seek Regents’ approval to allow up to X% of the General Endowment Pool to be in digital assets, and separately, to allow campus foundations to accept and hold crypto gifts with proper controls.” This way, the Regents are giving a broad policy nod, but specifics can be handled by the investment office and campuses. The Regents might appreciate that approach since it retains oversight at the high level but operationalizes locally.
• Results from Pilot (if any): If by the time of Regents presentation we have some pilot results (like from Phase 1 above – maybe we will go to them after doing a tiny pilot quietly), report those: “We’ve done a test investment of $500k via an ETF which is up 20%, demonstrating early success.” Hard data of profits always helps sway financial decision-makers.
• Long-term Vision: Paint a picture of what success looks like to the Regents: “If this small allocation performs well, down the road it could meaningfully increase funds available for student support. We will of course reassess continuously – if it doesn’t prove out, we’ll scale it back. But with an eye on the future, this is an opportunity for UC to maintain its financial leadership. Just as UC invested early in venture capital and benefited, this could be analogous for the digital asset era.” UC Investments did have a reputation for innovation decades ago (Swensen at Yale gets credit for endowment model, but UC was also a major institutional investor in alternatives). Reminding Regents of that tradition – that to achieve strong returns, sometimes prudent innovation is needed – can encourage them.

In summary, for the Regents the tone is: “This is a carefully considered, minimal-risk enhancement to our investment strategy, consistent with our duties and in line with moves by peer institutions, that could yield significant benefits. We have all the controls and oversight to do it responsibly. Approving this would keep UC at the forefront of institutional investing and support our campuses’ financial strength.”

By tailoring in this way, we address UCLA leaders’ desire for campus gains and minimal disruption, and Regents’ focus on fiduciary prudence, oversight, and system-wide implications. Both groups ultimately want what’s best for the institution but view it from different angles – our approach gives each the assurances and benefits that matter to them.

Conclusion and Executive Summary Recap

Executive Summary:

In conclusion, we propose that the University of California system – and UCLA as a flagship campus – take the pioneering step of integrating Bitcoin into their financial strategy through the establishment of a Bitcoin Strategic Reserve and a Bitcoin Endowment Fund. This dual approach is designed to achieve key objectives such as hedging against inflation, diversifying the portfolio, demonstrating innovation leadership, and engaging a new class of donors.

Our proposal recommends a cautious, phased implementation: starting with a modest allocation (e.g. well under 1% of assets) and potentially using regulated Bitcoin ETFs for initial exposure to minimize operational complexity . Concurrently, UCLA would launch a dedicated Bitcoin-denominated endowment fund seeded by forward-thinking donors – leveraging strong interest in crypto philanthropy where donors benefit from tax advantages and alignment with their values . Both models could eventually be combined into a hybrid structure, optimizing both reserve stability and endowment growth.

We have carefully analyzed the legal, financial, and regulatory implications. Holding Bitcoin in an endowment is permissible under the prudent investor standards (as long as it’s a small part of a diversified portfolio) , and indeed peer institutions like Emory and Harvard have already made such investments public . Regulatory clarity has improved by 2025 – the SEC has approved spot Bitcoin ETFs and the U.S. government itself now retains forfeited Bitcoin as part of a Strategic Reserve , setting a supportive backdrop for institutional holders. We will ensure compliance and prudent oversight by updating UC’s investment policies and employing top-tier custodians to secure assets.

Governance and security are at the forefront of our design: we will utilize multi-signature custody solutions requiring multiple approvals for any movement of funds, thereby virtually eliminating single-point failure risk . The Bitcoin reserve and fund will be managed with the same rigor as other UC investments, with regular audits, reporting to Regents, and adherence to all fiduciary requirements. Our risk analysis shows that with an allocation this small, even extreme volatility would have minimal impact on total assets, while the upside could be significant – a true asymmetric benefit scenario. Risks such as price swings, regulatory changes, or cybersecurity threats have been addressed with targeted mitigation strategies (gradual phasing, strong custody, insurance, etc.). We acknowledge environmental concerns associated with Bitcoin mining and plan to proactively address them, for instance by using a portion of any gains to support sustainability initiatives, aligning the endeavor with UC’s climate commitments.

Implementing this plan will be done in measured stages: initial pilots (perhaps via ETF) to validate processes, followed by incremental scaling of holdings and active fundraising for the endowment component. UCLA can begin to attract crypto donations immediately – building momentum with early gifts and publicity (as seen at other universities where first-mover reputation drew donor interest ). Over time, as the fund appreciates, a portion of returns can be deployed to support UCLA’s academic mission – whether through additional scholarships, endowed chairs in emerging tech, or funding cutting-edge research – thus directly translating this financial innovation into academic excellence.

We have benchmarked this proposal against peer institutions and analogous cases. The tide is clearly turning: multiple Ivy League endowments (Harvard, Yale, Brown) and major foundations have stepped into crypto investments, motivated by concern over inflation and a drive not to be left behind in a new financial era . Emory’s public disclosure in 2024 marked a milestone , and we intend for UC to take the torch as the first public university system to embrace this innovation comprehensively. By acting now, UC and UCLA position themselves as thought leaders, likely encouraging others to follow suit – much as endowments copying each other in adopting alternatives historically. The University of Texas (UTIMCO) and others have quietly explored crypto via funds; UC would elevate that by doing so transparently and strategically, which is commensurate with our role as the nation’s premier public university system.

Importantly, we have tailored this plan to the needs and concerns of both UCLA leadership and the UC Regents:

• For UCLA, this initiative promises new resources for the campus, integration with educational programs, and bolstering UCLA’s image as an innovative, tech-forward institution – all achieved with negligible risk to existing budgets.
• For the UC Regents, the plan is presented as a prudent enhancement to our long-term investment strategy, carefully controlled and fully in line with fiduciary best practices, potentially improving portfolio returns while maintaining UC’s reputation for sound management . We have structured oversight such that the Regents maintain full control over policy, and we only proceed within agreed parameters and with regular accountability.

In summary, establishing a Bitcoin Strategic Reserve and Bitcoin Endowment Fund is a forward-thinking move that aligns with UC’s mission of innovation and stewardship. It allows UC and UCLA to diversify and protect our financial assets in an era of monetary uncertainty , to engage and inspire donors in the technology community, and to provide our students and faculty with a living example of innovation in action. By executing this proposal responsibly and transparently, the University of California can secure its financial future and continue to lead – academically and financially – well into the 21st century.

We respectfully submit this comprehensive proposal and recommend moving forward with a pilot implementation. The potential benefits, as outlined – from inflation hedging to donor engagement and innovation leadership – make a compelling case. With proper governance, the risks are manageable and the rewards could significantly enhance UC’s ability to fulfill its academic and public service mission. Adopting this proposal would mark yet another historic milestone for the University of California: just as UC has led in scientific and social innovation, it can now lead in the prudent adoption of digital asset management for the betterment of the institution and its stakeholders.

Next Steps: Upon approval in principle, we will formulate the detailed implementation plan (Phase 1 pilot) and bring back any necessary specific approvals (e.g., policy amendments) to the Regents at the next meeting. We will also proceed to cultivate initial donor interest for the UCLA Bitcoin Endowment Fund, aiming to announce the first significant gifts to this fund within the next 6-12 months. Simultaneously, the UC investment office will begin execution of the strategic reserve allocation in line with market conditions and the guidelines discussed. We will keep all stakeholders informed at each stage.

The University of California has always been at the forefront of new frontiers – from space exploration to the digital revolution – and this venture into the realm of cryptocurrency continues that tradition in service of our public mission. With careful stewardship, a UC Bitcoin reserve and endowment can become a model of how public institutions innovate to secure their future. We urge thoughtful consideration and are prepared to address any further questions or concerns as we move forward.

Sources:

1. Emory University’s endowment Bitcoin investment and value increase 
2. Emory endowment’s rationale and broad asset diversification strategy 
3. Harvard Management Company’s Bitcoin ETF investment amid inflation concerns 
4. UCLA professor’s perspective on Bitcoin’s speculative nature for endowments 
5. Chainalysis report noting Emory as first university with Bitcoin and Brown/Harvard positions 
6. UATX’s pioneering direct Bitcoin endowment fund and custody partnership 
7. Inside Higher Ed on Emory being first to disclose Bitcoin ETF holding, analyst commentary 
8. Foundation Group on prudent management – crypto as small portion won’t violate rules 
9. Reuters on institutional adoption, Wisconsin pension and others buying Bitcoin ETFs 
10. Pymnts/FT report on endowments and foundations increasing crypto investments, Rockefeller Foundation CIO quote 
11. UoPeople press release on creating a crypto endowment with initial $2M donation 
12. U.S. Executive Order establishing a Strategic Bitcoin Reserve (holding seized BTC long-term) 
13. Chainalysis on multi-signature custody importance for public holdings 
14. Emory Wheel coverage providing context on Bitcoin ETF legitimization for institutions 
15. Crypto Council report noting Emory’s move and that many universities are now considering crypto long-term 
16. University of Austin announcement framing Bitcoin endowment as reflecting shared innovative values