Proposal for Integrating Bitcoin into Culver City’s Treasury Strategy

Introduction and Executive Summary

Culver City is exploring the inclusion of Bitcoin in its municipal treasury to enhance financial resilience and establish the city as a forward-thinking, tech-friendly municipality. This proposal outlines a comprehensive Bitcoin treasury strategy, covering the rationale for holding Bitcoin, legal and regulatory considerations, risk management plans, comparative case studies, financial implications, and phased implementation options. By cautiously adopting Bitcoin – starting with a small allocation and robust safeguards – Culver City can hedge against inflation, diversify its assets, and signal its commitment to innovation, all while complying with relevant laws and managing risks responsibly .

Rationale for Holding Bitcoin in the City Treasury

Hedge Against Inflation and Store of Value: Bitcoin’s fixed supply of 21 million coins has drawn comparisons to “digital gold,” making it an attractive hedge against inflation and currency debasement . In an era of expansive monetary policy and rising prices, even a modest Bitcoin reserve could help protect Culver City’s purchasing power. Federal policymakers have noted the strategic advantage of being early adopters of Bitcoin reserves . Likewise, state initiatives (e.g. Texas and Arizona) explicitly aim to use Bitcoin reserves as safeguards against inflation and to enhance financial resilience . By holding a small portion of reserves in Bitcoin, the city can mitigate the risk of dollar inflation eroding its long-term funds .

Diversification of Treasury Assets: Bitcoin’s historical performance and low correlation with traditional assets offer diversification benefits for public treasuries. Corporate treasury analyses have found that adding even a 1-5% allocation to Bitcoin alongside bonds and cash can improve long-term portfolio returns, especially during periods of high inflation . A diversified municipal portfolio that includes Bitcoin (in addition to conventional instruments like U.S. treasuries and municipal bonds) could increase overall risk-adjusted returns over the long run. Importantly, state legislation enabling crypto reserves (e.g. New Hampshire’s 5% Bitcoin allocation limit for public funds) underscores that Bitcoin can supplement – not replace – traditional assets . For Culver City, a carefully limited Bitcoin position (e.g. 1-5% of reserves) would serve as a complementary asset, improving diversification without jeopardizing core funds .

Positioning as a Tech-Friendly, Forward-Thinking City: Embracing Bitcoin would reinforce Culver City’s reputation as a hub of innovation and technology. Around the world, leading cities have pursued crypto-friendly strategies to attract investment and talent. Rio de Janeiro, for example, announced plans to invest 1% of its treasury in Bitcoin, explicitly aiming to become a global crypto hub on par with Miami and “Crypto Valley” Zug . City officials acknowledged Bitcoin’s volatility but emphasized that embracing the “future” of finance would position Rio as a cryptocurrency-friendly city and inspire public confidence in innovation . Similarly, in the U.S., Fort Worth, Texas became the first city to mine Bitcoin as a symbol of tech innovation, with the mayor positioning the city “at the forefront of tech and innovation” to draw tech commerce . By integrating Bitcoin into its treasury strategy, Culver City would send a powerful message that it welcomes the digital economy. This could attract fintech startups, blockchain investment, and skilled workforce to the city, spurring local economic growth. In short, a Bitcoin treasury initiative aligns with Culver City’s strategic goal of being a modern, tech-forward municipality and could bolster its brand as a regional innovation leader .

Long-Term Financial Upside: While speculative, Bitcoin has shown strong long-term appreciation, outpacing many traditional assets over the past decade. A small, long-term allocation gives the city exposure to this upside. Had an average institution allocated 1% of assets to Bitcoin in 2019, that stake would have grown several-fold by 2024 despite interim volatility . For Culver City, any significant appreciation of a Bitcoin holding could bolster its financial position (e.g. growing the general fund or funding future projects) without raising taxes. This potential upside, combined with the above benefits, forms a compelling rationale: a prudent Bitcoin position can serve as both insurance against macroeconomic risks and an investment in the city’s innovative future .

Legal and Regulatory Considerations

Implementing a Bitcoin treasury strategy requires navigating state and federal regulations to ensure full compliance:

• State Law Constraints (California): California law tightly governs how local governments can invest public funds. The California Government Code (§53601 et seq.) enumerates permissible investments for municipalities, generally conservative instruments (e.g. government bonds, insured deposits). Cryptocurrencies are not currently an authorized investment class for California municipalities, akin to how state codes typically disallow investments in foreign currency or equities . The Government Finance Officers Association (GFOA) has advised that due to legal and risk factors, most state laws do not permit investing public funds in crypto assets . Therefore, absent legislative change or special authorization, Culver City cannot directly purchase Bitcoin using treasury funds under existing California statutes. This legal reality necessitates careful structuring of any Bitcoin initiative (see “Phased Implementation” for approaches) and possibly advocacy for updated state legislation in the future.
• Recent California Crypto Legislation: California is cautiously opening the door to digital assets in the public sector, primarily for payments rather than investments. Assembly Bill 1052 (2025) was passed to enable (but not require) state and local agencies to accept cryptocurrency as payment for government services, effective July 1, 2026 . This law clarifies that Bitcoin and other digital assets can be accepted as “valid and legal consideration” for fees, taxes, or services, at an agency’s discretion . However, AB 1052 is permissive and not a mandate – it allows crypto acceptance but does not compel any agency to hold crypto long-term . Crucially, the law does not explicitly authorize holding crypto in treasury reserves; most agencies accepting crypto (e.g. the State of Colorado’s tax payments program) immediately convert it to USD via a payment processor to avoid volatility risk. Culver City could leverage AB 1052 in the future to pilot accepting Bitcoin payments (for, say, business licenses or permit fees), converting them to dollars or possibly retaining small balances as a treasury holding if legal and policy conditions permit. Nonetheless, any decision to hold Bitcoin received as payment would need careful legal review, since AB 1052’s intent is to facilitate transactions, not speculative investment.
• Federal Regulatory Status of Bitcoin: Federally, Bitcoin is lawful to own and transact, but it is subject to various definitions across agencies. The IRS classifies Bitcoin as property for tax purposes (not legal tender), meaning that dispositions are taxed as capital assets . The Commodity Futures Trading Commission (CFTC) has deemed Bitcoin a commodity, and it is exempt from U.S. securities laws (unlike many other crypto tokens that may be securities) . These definitions provide some regulatory clarity: holding Bitcoin is treated similarly to holding a commodity like gold from a federal standpoint. However, federal laws on financial transactions (anti-money-laundering, etc.) still apply. If Culver City engages in buying or selling Bitcoin, it must ensure compliance with FinCEN guidelines and anti-money-laundering (AML) requirements. In practice, this means working with properly licensed brokers or exchanges for any transactions and adhering to Know-Your-Customer (KYC) standards to prevent misuse of public funds . Fortunately, federal guidance for banks and financial service providers has evolved to support compliant Bitcoin operations . By partnering with reputable, regulated institutions (see Risk Management), the city can operate within the federal legal framework.
• State Precedents and Evolving Regulations: While California has yet to authorize crypto investments for cities, other U.S. jurisdictions have begun to do so, pointing to a broader regulatory shift. New Hampshire (2025) now allows its state treasurer to invest up to 5% of public funds in Bitcoin (market cap > $500B) , recognizing Bitcoin as an eligible reserve asset under certain conditions. Texas (2025) established a state-managed Texas Strategic Bitcoin Reserve outside its general treasury, explicitly to hold Bitcoin as a long-term investment for the state . Arizona similarly launched an Arizona Bitcoin & Digital Assets Reserve funded by unused assets, after clarifying how such a fund can operate legally . These examples suggest that laws can be crafted to permit public Bitcoin holdings in a prudent way. Culver City should monitor California’s legislative developments – any future state law or pilot program that authorizes municipal crypto reserves could provide a legal pathway. Until then, the city’s approach must work within current limits, perhaps by starting with activities that don’t violate investment rules (like mining or accepting donations, as discussed later).
• Custodial and Security Regulations: One important legal consideration is how the city would custody (safekeep) any Bitcoin it holds. California’s new Digital Financial Assets Law (DFAL), effective July 2025, requires crypto custodians and exchanges serving Californians to be licensed and meet stringent consumer protection standards . This law was designed to ensure that any entity holding digital assets on behalf of others has adequate security, capital, and compliance in place . For Culver City, this means any third-party custodian or wallet provider chosen must be a qualified, licensed custodian under DFAL or equivalent regulations. Fortunately, an array of reputable firms (some chartered as trust banks) offer institutional crypto custody with insurance and regulatory oversight . Arizona’s law, for example, mandates use of U.S.-regulated custody providers for its state Bitcoin reserve . Culver City will likewise only entrust its digital assets to custodians that are insured, audited, and compliant with federal and state requirements. This ensures legal compliance and minimizes liability – the city would not self-custody the assets on a flash drive in a desk drawer; it would engage a professional custodian subject to banking and security laws.
• Public Finance and Fiduciary Duty: Holding Bitcoin must be squared with the city officials’ fiduciary duty to protect public funds. California’s prudent investor standard (Govt. Code §53600.3) obligates fiduciaries to act with care, skill, and caution in managing public assets . Given Bitcoin’s volatility, any allocation should be justified as a prudent long-term diversification rather than speculation. The GFOA and municipal finance community currently urge caution – GFOA’s official advisory (2022) recommends that governments “abstain from investing in cryptocurrency” due to volatility, liquidity, and legal concerns . This stance reflects the conservative nature of public fund management. Culver City’s strategy must acknowledge these concerns and proceed in a measured way that can withstand public scrutiny. By limiting Bitcoin to a small percentage of reserves, implementing robust risk controls, and possibly structuring the holdings through a separate fund or pilot program, the city can demonstrate that it is not violating fiduciary principles. It’s also worth noting that attitudes are changing: as larger governments (and even the U.S. federal government) begin to manage Bitcoin reserves for strategic purposes , the concept is gaining legitimacy. Still, any plan will involve close consultation with legal counsel, the city treasurer, and perhaps state authorities to ensure full compliance with the letter and spirit of the law.

In summary, the legal environment requires Culver City to tread carefully. Bitcoin is not yet a conventional investment for municipalities in California, so the city must design its strategy within current legal allowances (e.g. accepting crypto under AB 1052, or exploring creative options like energy-based mining contracts ) while advocating for sensible regulatory evolution. Ensuring compliance through licensed custodians and adhering to prudent investment standards will be paramount to the strategy’s legality and success.

Risk Management Plan for a Bitcoin Treasury

A detailed risk management plan is essential to address the unique risks of holding Bitcoin in a public treasury. This plan covers custody and security, volatility mitigation, and operational protocols to safeguard the city’s digital assets.

1. Secure Custody Solutions: Safeguarding the private keys that control Bitcoin is the most critical technical risk. Instead of managing keys in-house, Culver City will use an institutional-grade custody provider to hold any Bitcoin reserves. Qualified custodians such as Anchorage Digital (a federally chartered digital asset bank) or BitGo (a licensed trust company) offer insured, cold-storage custody where the city’s Bitcoins are held offline with multilayer security . These custodians carry crime insurance policies to protect against theft and have robust cyber defenses, audits, and compliance programs. The city will require that the custodian be regulated (licensed under DFAL or equivalent) and able to provide indemnification or insurance for losses . Multi-signature technology can be employed so that no single party has unilateral control: for example, transactions from the city’s account could require approval from multiple authorized officials and the custodian, adding a layer of internal control. Additionally, the custodian should support segregation of assets (the city’s holdings are held in trust, not comingled with any company funds) to protect them even in the unlikely event of the custodian’s insolvency. Regular audits of the Bitcoin holdings will be conducted, with reports to the City Council or an oversight committee, to verify that the recorded balances match the custodied assets. By entrusting Bitcoin to a reputable custodian and implementing multi-signature access control, Culver City will minimize risks of hacking, loss, or internal misuse of the funds.

2. Volatility Management: Bitcoin’s market price is highly volatile, which could impact the city’s financial statements and public perception. The risk management plan addresses this in several ways. First, the allocation to Bitcoin will be kept small (e.g. 1-5% of total treasury assets), such that even large swings in Bitcoin’s price have a limited impact on the overall portfolio . This adheres to diversification best practices: Bitcoin will supplement but not dominate the city’s holdings . Second, the city will treat the Bitcoin reserve as a long-term illiquid investment, not funds for short-term operational needs. By segregating a strategic reserve, the city can weather interim price fluctuations without jeopardizing budget liquidity. (Notably, Texas structured its Bitcoin Reserve as a fund independent of the general treasury to ensure it wouldn’t affect day-to-day finances .) The city can also implement a dollar-cost averaging approach to acquiring Bitcoin over time, to avoid buying at a single high price. For example, if $X million is allocated, purchases can be spread in equal tranches over several months or quarters to smooth out entry price volatility. If extreme volatility occurs (e.g. a sudden 50% market drop), the policy could allow temporary rebalancing or pauses on further purchases – however, the general intent is not to trade frequently but to hold Bitcoin through cycles, much like an endowment, thereby reducing the need to “time the market.” Over a long horizon, short-term volatility becomes less significant. Still, mark-to-market accounting will be applied: the city will report the fair market value of its Bitcoin holdings in financial reports. Any unrealized losses or gains can be accounted for in an earmarked reserve fund to isolate their impact. By limiting exposure and committing to a long-term strategy, Culver City can manage volatility risk in line with its risk tolerance.

3. Liquidity and Conversion Strategy: Although the plan is to hold Bitcoin long-term, the city will maintain the ability to liquidate the holdings in an orderly manner if needed (for example, if legal conditions change or the financial position warrants). The chosen custodian or brokerage partners will have OTC (over-the-counter) trading capability to convert Bitcoin to cash without moving markets significantly. Liquidity risk is mitigated by Bitcoin’s deep global market – even in volatile times, Bitcoin can typically be sold 24/7. Nonetheless, the city will avoid forced selling at low prices by not relying on Bitcoin for operating cash flow. In a worst-case scenario (say a prolonged price decline or legislative mandate to divest), the city would formulate an exit strategy to sell gradually, potentially using any realized losses as tax write-offs if applicable (though the city doesn’t pay income tax, losses could offset gains elsewhere or be absorbed through budget planning). The key is that Bitcoin holdings will be isolated from critical liquidity needs, so the city is never in a position where it must sell at an inopportune time.

4. Regulatory Compliance and Oversight: The city will set up an internal Bitcoin Treasury Committee consisting of the City Treasurer, Finance Director, City Manager, and external advisors as needed (e.g. legal counsel, cybersecurity expert). This committee will establish policies for the Bitcoin reserve and monitor compliance. All transactions (purchases, sales, transfers) would require committee approval and dual authorization to prevent errors or malfeasance. The committee will also ensure ongoing regulatory compliance – for instance, verifying that the custodian remains licensed and in good standing under DFAL, and monitoring any changes in federal or state law that affect municipal crypto holdings. Regular reports will be made to the City Council’s finance subcommittee, providing transparency about the reserve’s current value, performance, and any incidents. To further bolster oversight, Culver City can mandate independent audits of its digital asset reserves (either as part of the annual financial audit or via specialized auditors). Transparency and accountability will be emphasized to maintain public trust: while exact security procedures (like key locations) will remain confidential, the existence and performance of the Bitcoin treasury will be publicly reported, likely in a quarterly or annual Treasury Diversification Report.

5. Insurance and Disaster Recovery: As part of risk management, the city will explore insurance options for digital asset holdings. Some custodians include a certain amount of insurance coverage (for example, against theft or hacking). The city can consider purchasing additional insurance riders to cover the Bitcoin reserve’s value. Although insurance for crypto volatility is not available, insurance can cover loss of assets due to operational failures or crime. In parallel, the city and custodian will have a disaster recovery plan – for instance, if a catastrophic event (natural disaster, etc.) affects city operations, the Bitcoin can still be accessed or liquidated through predefined emergency procedures involving the custodian and multiple authorized officials. Backup copies of authorization materials (secure seed phrases or credentials) will be stored in multiple secure locations (e.g. bank vaults) to prevent single-point failure.

By addressing custody, volatility, oversight, and insurance, this risk management plan strives to make Culver City’s Bitcoin holdings as secure and well-managed as any traditional asset. The goal is to achieve the benefits of Bitcoin (inflation hedge, growth, diversification) while minimizing the operational and financial risks to a level acceptable for a public entity. The approach taken echoes the controls other public institutions are using – for example, Arizona’s reserve with mandated regulated custody and diversification rules – and adapts them to Culver City’s context. Ultimately, the city will only proceed with holding Bitcoin if these risk measures are in place, ensuring that the venture is prudent and responsible.

Comparative Case Studies: Municipal and Institutional Crypto Strategies

To inform Culver City’s strategy, we review several case studies of municipalities and public institutions that have implemented or considered Bitcoin and digital asset initiatives. These examples provide lessons on goals, approaches, and outcomes in the emerging area of public-sector crypto finance.

Table 1. Comparative Case Studies of Bitcoin in Public Treasuries and Institutions

Entity (Location)	Strategy & Scope	Rationale and Goals	Key Measures Implemented	Outcomes & Insights
Fort Worth, Texas (City)	Bitcoin Mining Pilot – First U.S. city government to mine Bitcoin on a small scale (3 mining rigs in City Hall for 6 months) .	– Showcase tech innovation and put Fort Worth on the map as crypto-friendly .- Learn operational aspects of crypto in a low-risk way.	– Donated equipment: Partnered with Texas Blockchain Council, which donated rigs (no taxpayer cost) .- Energy monitoring: Limited scale and tracked power usage to address sustainability concerns .- No direct purchase of Bitcoin – earned mining rewards (~$1,000 value) which were held by the city .	– Successfully branded Fort Worth as forward-looking; attracted positive media and interest from tech firms .- Financially, the pilot profit was modest (~$1K), underscoring that the value was more in experiential learning and PR .- Highlighted importance of regulatory clarity – city navigated ambiguous laws by starting very small (“operating with a blindfold on”) .
Miami, Florida (City)	Crypto-Friendly Initiatives – Explored holding Bitcoin in treasury and launched MiamiCoin (city-specific crypto) with revenues converted to USD . Also enabled employees to opt for paycheck in Bitcoin and studied accepting taxes in Bitcoin .	– Attract tech investment and position Miami as “Bitcoin capital” of the U.S. .- Diversify city revenue via crypto (MiamiCoin proceeds) and engage residents with digital wallets .- Hedge against inflation and boost city funds if crypto values rose (discussed by Mayor Suarez).	– CityCoin program: City earned ~$21M by allowing a community crypto (MiamiCoin) to be mined, taking a 30% cut; city commission accepted these funds with stipulation they be converted to USD upon withdrawal (city did not directly hold crypto) .- Resident dividends: Proposed giving Miami residents a “Bitcoin dividend” from MiamiCoin revenue (required setting up digital wallets for residents) .- Policy resolutions: City Commission passed a resolution to analyze holding Bitcoin in the treasury and enable tax payments in crypto (implementation pending due to state laws).	– Miami’s crypto push significantly raised the city’s profile, drawing crypto businesses and conferences, and even leading to new tech sector jobs (the “Miami effect”).- Direct Bitcoin holding has not yet materialized (the city holds no BTC to date), highlighting regulatory and political hurdles. Instead, Miami found a workaround via CityCoin, converting crypto to USD to stay within legal guardrails .- Resident engagement with crypto remains a work in progress (wallet distribution plan ongoing). Miami’s case shows the value of strong political leadership in advancing crypto initiatives, but also that legal constraints can limit a city’s ability to hold crypto directly.
Rio de Janeiro (City, Brazil)	Treasury Investment – Announced plan to allocate 1% of city treasury reserves to Bitcoin (first major city in Brazil to do so) . Also launched a municipal crypto (Crypto Rio) and considered tax incentives for paying in Bitcoin .	– Hedge inflation: Protect local savings amid high inflation; offer an alternative store of value for the city .- Crypto hub ambition: Make Rio a Latin American center for crypto innovation, akin to Miami or Zug . Reduce distrust of crypto by leading through example .	– Legislative backing: Coordinated with Brazilian legal frameworks – while Bitcoin is not legal tender, Rio worked within regulations to permit a small allocation (likely via an investment fund or public company structure).- Public communication: City leaders openly acknowledged volatility but framed Bitcoin as the future, educating the public on its deflationary aspects .- Supplementary programs: Developing Crypto Rio token and tech hub zone with tax breaks to attract blockchain companies .	– Announcement generated enthusiasm and put Rio on the global crypto map . Early reactions suggest improved sentiment among tech investors in Rio.- Still in early stages of implementation (as of 2023-2024) – actual allocation of 1% is subject to careful execution. Will be a test of how a city handles accounting and custody in practice.- Key insight: Even a small (1%) allocation can have outsized reputational impact. Rio’s strategy is inspiring other jurisdictions but also will be watched for how it balances volatility vs. inflation hedge outcomes.
El Salvador (National Govt.)	Nation-State Adoption – First country to adopt Bitcoin as legal tender (2021). Government purchased Bitcoin for national treasury (est. 2,381 BTC by 2022) and launched a $150M trust to convert Bitcoin for merchants and ATMs .	– Financial inclusion: Bank the unbanked and facilitate remittances with Bitcoin via the Chivo wallet.- Sovereign diversification: Reduce reliance on the US dollar (El Salvador is dollarized) and potentially attract foreign investment/tourism via crypto novelty. – Growth narrative: President Bukele pitched Bitcoin adoption as positioning the country at the forefront of technology and finance.	– Legal framework: Bitcoin Law required businesses to accept BTC alongside USD. The national treasury directly holds Bitcoin and manages conversions through a state-run trust fund.- Infrastructure: Rolled out a national wallet (Chivo) and Bitcoin ATM network. Offered incentives like $30 in BTC to every citizen who downloads Chivo to encourage uptake.- Risk mitigation: Secured a $1.4B loan from IMF with provisions to ensure Bitcoin use is “confined” to certain channels and does not destabilize financial system . (Faced pressure from IMF to regulate and limit exposure.)	– Tourism boost: Tourism up ~30% year-over-year after Bitcoin adoption, credited to influx of crypto enthusiasts . Also saw new investment (e.g. Bitcoin miners) enter the country, validating some of the “crypto hub” hopes.- Fiscal risk and volatility: The value of El Salvador’s Bitcoin holdings has fluctuated wildly, contributing to credit rating concerns. During bear markets, unrealized losses mounted, sparking public criticism and IMF warnings . So far, the government has held its position, betting on long-term gains.- Lesson: National adoption can accelerate economic activity and innovation, but budgeting with a volatile asset is perilous. El Salvador is implementing accounting measures and was asked to increase transparency and risk controls around its Bitcoin funds . For Culver City, the takeaway is to avoid overexposure and maintain clear disclosure when dealing with taxpayer funds.
Public Pension Fund (Houston Firefighters Pension, USA)	Institutional Investment – In 2021, Houston’s firefighter pension fund invested $25 million (approx. 0.5% of assets) into Bitcoin and Ether via a custodial partnership . First known U.S. public retirement fund to buy crypto directly.	– Diversification and return: Augment traditional portfolio (stocks, bonds) with a small allocation to potentially higher-yielding assets; manage long-term pension liabilities with uncorrelated growth drivers. – Trendsetting: Gain experience with digital assets early on, anticipating broader financial adoption.	– Custody/management: Used NYDIG, a regulated crypto investment firm, to handle custody and execution, ensuring compliance and security.- Board approval & policy: Investment was approved by the pension board after extensive study; capped at a low percentage to limit risk.- Accounting: Treated as alternative investment, marked at fair value each period. Communicated to stakeholders as a 10+ year horizon investment.	– Performance has varied with crypto market cycles, but the fund has not faced liquidity issues given the tiny allocation and long horizon. As of mid-2023, the investment was roughly breakeven/up since inception, vindicating the cautious approach.- This case shows that even highly risk-averse public fiduciaries (pensions) have begun dipping into crypto when proper controls are in place. It provides a blueprint for Culver City on how to justify and implement a small, managed exposure within a broader fund without jeopardizing core obligations. The importance of starting with a very modest allocation and a clear policy mandate is emphasized by this example.

Key Takeaways from Case Studies:

• A phased or limited-scope pilot (as Fort Worth did) is a prudent way to introduce Bitcoin to municipal operations, allowing the city to demonstrate capability and learn by doing on a small scale before committing significant funds . Public-private partnerships (e.g. equipment donations, expert advisory from blockchain councils) can reduce costs and risks in pilot phases . Culver City should consider a similar incremental pilot approach.
• Public perception and political leadership matter enormously. In Miami and Rio, mayoral leadership and clear communication of vision (making the city a crypto-finance hub) were critical in gaining support . However, transparency about risks is also important – Rio’s acknowledgment of volatility and El Salvador’s ongoing dialogue with institutions like the IMF show that being open about challenges helps manage expectations . Culver City’s officials must proactively explain the why of a Bitcoin strategy to residents: emphasizing innovation, prudent diversification, and economic positioning rather than speculative profit.
• Regulatory compliance is non-negotiable. Miami worked around Florida’s constraints by not directly holding crypto (converting CityCoin revenue to USD) , and pension funds used regulated intermediaries to satisfy legal duties . Any strategy that conflicts with prevailing law tends to stall (e.g. some U.S. cities announced intentions to hold Bitcoin but had to pause due to state restrictions). Culver City’s plan must be aligned with California’s legal allowances or structured to avoid conflict (such as using a third-party trust or foundation if necessary).
• Risk control strategies observed include: limiting allocation size (New Hampshire’s 5% cap; Houston pension’s <1% allocation) ; ensuring independent oversight committees (Texas’s 5-member advisory board for its reserve includes crypto experts) ; and mandating professional custody (Arizona’s law) . Incorporating these controls will bolster the credibility of Culver City’s initiative.
• The potential rewards (financial and reputational) are tangible: increased tourism and business (El Salvador’s tourism rose, Miami attracted firms, Fort Worth gained national visibility) . Yet, so are the risks: volatility can cause public controversy and require contingency plans (El Salvador faced IMF concerns and fiscal questions during downturns) . The case studies underscore that a municipality should only invest what it can afford to hold long-term, and ideally derive ancillary benefits (innovation ecosystem, education, new revenues) to make the effort worthwhile even if direct financial returns take time to materialize.

These case studies guide our proposal by highlighting best practices and pitfalls to avoid. Culver City can learn from each: start small like Fort Worth, communicate vision like Miami and Rio, stay legally compliant, and prioritize prudent risk management like the public pension did. With these lessons in mind, we now examine the financial implications of a Bitcoin treasury strategy for Culver City.

Financial Implications: Long-Term Benefits and Drawbacks

Introducing Bitcoin into Culver City’s treasury entails various financial implications that must be weighed carefully. This section analyzes the potential benefits (such as return on investment, inflation protection, and new revenue opportunities) against the drawbacks (volatility, opportunity cost, and risk of loss), with an emphasis on long-term impacts.

Potential Long-Term Benefits:

• Capital Appreciation and Returns: Bitcoin has exhibited strong historical growth. If Bitcoin’s adoption and value continue to increase over the coming decades, the city’s small investment could appreciate significantly, bolstering public finances. For instance, as a thought experiment, a 1% allocation made five years ago would have dramatically grown (over 7x by 2024) despite intervening downturns . Such growth could help fund future infrastructure or community projects without raising additional revenue. While past performance is no guarantee, Bitcoin’s design (finite supply amid rising demand) suggests a positive long-term expected value – a thesis supported by institutional investors and some governments now treating it as a treasury reserve asset . In essence, Culver City gains a stake in the upside of the digital economy’s expansion.
• Inflation Hedge and Diversification: By converting a portion of cash reserves into Bitcoin, the city hedges against the risk of U.S. dollar weakening. In high-inflation scenarios or if the dollar’s global status erodes, Bitcoin could retain value or even rise as investors seek alternative stores of value. This inverse relation to fiat currency health provides insurance for the city’s purchasing power . Diversification theory holds that adding an uncorrelated asset can improve a portfolio’s overall stability. Bitcoin’s price movements are largely independent of municipal bond yields or tax revenues, so a small allocation may reduce overall financial volatility in the long run, smoothing performance across economic cycles . This could prove beneficial in eras of low bond yields or economic stress, where traditional investments underperform inflation.
• Ancillary Revenue Opportunities: Beyond direct price appreciation, engaging with Bitcoin could open new revenue streams or cost savings. For example, if the city pilots accepting Bitcoin for fees/taxes (once legally permissible) and holds some of those receipts during appreciation, that’s effectively extra revenue. Some cities have also earned yield through crypto innovations – Miami’s staking of MiamiCoin generated $5 million+ in yield that was earmarked for public use (converted to Bitcoin for distribution to citizens) . While Culver City might not launch its own coin, it could, for instance, explore yield-generating strategies like depositing Bitcoin into a secure institutional lending program for interest (though this introduces counterparty risk and would require extreme caution and likely legal changes). Additionally, having Bitcoin could allow the city to participate in future state or regional blockchain initiatives (e.g. if a county sets up a blockchain-based financing mechanism or if energy providers offer discounts for crypto paid accounts). These opportunities are speculative but conceivable in a rapidly evolving fintech landscape.
• Economic Development and Brand Value: Financial benefits also accrue indirectly. By being seen as one of the first movers in municipal Bitcoin adoption in California, Culver City could attract businesses and conferences (which boost local spending) and perhaps even increase property values if demand rises to locate in an innovation-friendly city. These effects are hard to quantify but real – El Salvador credited Bitcoin with a 22% bump in tourism and new foreign investment in sectors like geothermal energy and technology . A growing cluster of blockchain startups in Culver City would expand the tax base and create jobs, improving long-term economic health. In summary, the intangible asset of a tech-forward reputation can translate into tangible financial gains over time.

Potential Drawbacks and Costs:

• Market Volatility and Downside Risk: The most obvious drawback is Bitcoin’s notorious volatility. Price swings of ±50% in a single year (or even month) have occurred multiple times historically. A sharp downturn could significantly devalue the city’s holdings. For example, if the city bought at a peak and Bitcoin dropped 50%, the value of that reserve would halve, representing a paper loss that could raise public concern. Such volatility could complicate budgeting if not walled off properly. In a severe scenario, if Bitcoin’s value collapsed (due to regulatory bans or technological flaws, as skeptics sometimes warn), the city could lose most or all of its investment. While the probability of Bitcoin going to zero is widely debated and has decreased as the network matured, it is a non-zero risk. The city must be financially and politically prepared to tolerate large fluctuations – effectively treating the Bitcoin reserve like an endowment that may have bad years. Not all stakeholders may have the risk appetite for this; public criticism or political fallout is a real risk if a downturn is perceived as mismanagement of public funds. Therefore, the volatility is not just a financial issue but a governance one: city leaders would need to justify holding through slumps, which can be challenging under public scrutiny.
• Opportunity Cost: Funds allocated to Bitcoin are funds not allocated elsewhere. The city’s investment earnings on traditional instruments (LAIF, bonds, etc.) are relatively stable and support the budget. If, for instance, $500,000 is put into Bitcoin, that same money could have been yielding interest in the state’s local agency investment fund or used to pay down debt. The opportunity cost is the foregone guaranteed return or savings. If Bitcoin underperforms (or remains flat) for many years, the city might effectively lose interest income it could have earned otherwise. Additionally, staff time and resources spent on the Bitcoin initiative (due diligence, oversight committee meetings, audits) have an administrative cost. These could be seen as inefficient if the financial returns do not justify them. The city should weigh whether the expected return premium of Bitcoin (as a growth asset) sufficiently compensates for the lost risk-free interest it could earn on those funds. Modeling various scenarios (status quo vs. Bitcoin allocation) will help quantify this.
• Liquidity and Accounting Challenges: Governments value stability and predictability in their finances. A Bitcoin reserve introduces complexity in accounting and financial reporting. The Governmental Accounting Standards Board (GASB) has not yet issued definitive guidance on cryptocurrency accounting for public entities (as of 2025, they noted “much talk, little action” among governments regarding crypto, thus no standards yet) . Likely, the city would mark Bitcoin to market each period, causing swings in reported fund balances. This could make financial statements more volatile and potentially affect bond ratings or perceptions of fiscal health if not properly explained. Credit rating agencies and oversight bodies might view crypto holdings with caution. In a worst case, if a significant loss occurred and had to be realized, it could very slightly impact the city’s ability to fund services (though with a small allocation this risk is minimal). Another consideration is liquidity: while Bitcoin is liquid in the global sense, converting it to cash might take a few days and carry transaction costs. If an emergency expenditure arose exactly when Bitcoin’s price crashed, selling at a low could lock in losses – hence why the strategy emphasizes not relying on this asset for emergencies. However, its presence in the portfolio does add a layer of liquidity management to ensure other funds are sufficient for all needs. In summary, holding Bitcoin complicates financial management and may require new policies (e.g., establishing a stabilization reserve to buffer valuation changes) to avoid any adverse budgetary impact.
• Security and Custodial Costs: There will be some costs associated with secure custody and insurance. Institutional custody providers charge fees (which could be a fixed fee or percentage of assets under management). While likely not prohibitive for a small allocation, it is an added expense not incurred with holding cash or T-bills. Similarly, if additional insurance is purchased for the crypto assets, that premium is a cost to factor in. These costs eat into the net returns of the Bitcoin investment. There is also a tail-risk of security breaches – the plan is to mitigate it via third-party custody, but as seen in the private sector, even large exchanges have been hacked in the past. The city’s recourse in such an event depends on the custodian’s terms and insurance. Though very unlikely with a top-tier custodian, a black swan event of loss could trigger legal battles or require writedowns. Essentially, safeguarding Bitcoin demands operational diligence that is beyond what traditional assets require, and failing in that could have financial consequences.

Long-Term Outlook:

On balance, the long-term benefits could outweigh the drawbacks if the allocation is kept moderate and the city is patient. Bitcoin’s trajectory over 10+ years has rewarded those who weathered volatility. If Culver City enters with a multi-decade perspective, the inflation-hedging and appreciation potential may significantly strengthen its financial position in the 2030s and beyond, even if near-term swings are bumpy. The city could end up with a much larger reserve relative to doing nothing, essentially “future-proofing” a part of its assets. Additionally, soft benefits like attracting businesses can expand the tax base, indirectly improving finances.

However, it must be stressed that this is not a risk-free strategy. The city should not invest any amount it cannot afford to leave untouched for many years. Stress-testing various scenarios is prudent: for example, a scenario where Bitcoin loses 50% and stays down for 5 years, versus a scenario where it gains 200% over 5 years. These will help calibrate the impact on city finances. The presence of even a small crypto investment will require officials to be ready to answer tough questions during down cycles – a communication plan for stakeholders (residents, council members, auditors) is necessary so that everyone understands the long-term intent and the safeguards in place.

In conclusion, the financial implications range from potentially significant upside and strategic protection of value, to manageable risks and costs that need mitigation. With prudent management (small allocation, strong risk controls, and a willingness to hold through volatility), Culver City is positioned to realize the benefits of Bitcoin over the long run. The drawbacks, while real, can be circumscribed by policy – and as the ecosystem matures (with clearer accounting rules, more liquidity, etc.), some current drawbacks will diminish. The next section outlines how the city can implement this strategy in phases, ensuring that at each step, the financial impacts are carefully evaluated and the approach can be adjusted as needed.

Phased Implementation Plan and Pilot Program Options

A gradual, phased implementation will allow Culver City to test the waters of a Bitcoin treasury strategy, demonstrate success at each stage, and scale up the initiative in a controlled manner. Below is a proposed multi-phase roadmap, from initial exploration to full program, with options for pilot programs along the way:

Phase 1: Research and Stakeholder Engagement (Months 0-6)

• Establish a Working Group: Form a Bitcoin Treasury Task Force composed of city staff (Finance Director, Treasurer, IT/security officer), City Council representatives, and external advisors (e.g. a legal expert in municipal finance, a crypto industry advisor from a reputable firm or academia). This group will refine the strategy, address open questions, and build internal consensus.
• Legal and Policy Review: In this phase, the City Attorney’s office (with outside counsel if needed) will do a deep dive on California law and Culver City’s investment policies. The objective is to determine what is feasible under current law and whether any city policy amendments or state permissions are needed. For example, the team will clarify if a small pilot (with donated funds or mined Bitcoin) is permissible since it may not constitute “investing public funds” in the traditional sense. The working group can coordinate with the California State Treasurer’s Office or League of California Cities to gauge receptiveness to pilot programs – this could lay groundwork for special legislation or waivers if required.
• Stakeholder Outreach: Proactively communicate with key stakeholders – the City Council, city employee unions (if any concerns about pension funds, though the proposal is separate from pensions), and the public. Education sessions or workshops can be held to explain “Bitcoin 101” and the city’s goals (inflation hedge, modernization, etc.). Early transparency helps build trust and allows concerns to be raised and addressed. Public input can be sought via community forums or surveys, tapping residents’ sentiments. Given Culver City’s engaged community, incorporating public feedback will legitimize the effort.
• Operational Planning: Identify potential vendors and partners. In Phase 1, issue Requests for Information (RFIs) to crypto custody providers and payment processors to learn about their municipal offerings. Evaluate at a high level what it would take to accept Bitcoin payments (technologically and administratively) under AB 1052 authority – even if actual acceptance is later, understanding the workflow now is useful.
• Success Milestone: By end of Phase 1, produce a comprehensive Bitcoin Treasury Policy Document. This would include draft language for an updated investment policy (if needed to accommodate a pilot), risk management protocols (as outlined earlier), and a blueprint for Phase 2 pilot execution. City Council approval should be sought on this framework, ensuring political buy-in before any real transactions occur.

Phase 2: Pilot Program Implementation (Months 6-18)

With groundwork laid, the city can initiate one or more pilot programs to gain practical experience with digital assets:

• Option A – Bitcoin Mining Pilot: Emulate Fort Worth’s approach by running a small-scale Bitcoin mining operation on city property. Culver City could partner with a technology provider or local university to set up a few mining rigs in a controlled environment (perhaps at the city data center or a renewable energy site). Ideally, the equipment or electricity is sponsored (donated or grant-funded) to avoid using taxpayer money. This pilot would yield a trickle of Bitcoin, which the city can hold or convert. While not financially significant, it offers hands-on exposure to managing wallets and crypto earned, and signals innovation. The pilot’s scale (e.g. 3-5 machines) would be limited to keep energy usage modest and ensure noise is not an issue (Fort Worth addressed this by using their City Hall basement and monitoring consumption closely ). After 6-12 months, the program can be evaluated: How much BTC was mined? Were there technical or regulatory hurdles? Did it generate positive publicity and community engagement? A successful outcome would be demonstrating that the city can securely custody mined Bitcoin and integrate the process into city financial reporting.
• Option B – Accepting Bitcoin for Payments (Conversion Pilot): In this pilot, the city would start accepting Bitcoin (and potentially other major cryptocurrencies like Ether) for a specific type of payment, using a third-party payment processor. For instance, Culver City could allow the first 100 volunteer businesses to pay their business license fees or taxes in Bitcoin. Using a service like PayPal or Coinbase Commerce (subject to them being licensed under CA law by 2026) , payers would send Bitcoin but the city’s account would receive equivalent USD (or the city could opt to receive a portion in BTC). This way, the city tests out the user experience and back-end process without risking volatility on the payments (since conversion can be instant). It also gauges community interest – if nobody uses it, that’s informative, and if there is uptake, it proves local demand for crypto services. This pilot must wait until at least mid-2026 (when AB 1052 takes effect) unless a narrower sandbox exception is arranged earlier. Success metrics include number of transactions, any issues reconciling funds, and whether it can be expanded to more payment types. Even though this pilot doesn’t add Bitcoin to the treasury directly, it sets up the infrastructure and comfort level needed for eventually keeping Bitcoin on the balance sheet.
• Option C – Small Treasury Allocation Pilot: If legally feasible (perhaps through a workaround such as using non-general fund money or a donor contribution), the city could attempt a small purchase of Bitcoin to hold as a pilot investment. One approach: allocate a very small amount (say $50,000 or $100,000 – an amount not material to the budget) from an economic development fund or other discretionary reserve to buy Bitcoin. Alternatively, a local private donor or foundation supportive of the idea might contribute Bitcoin directly to the city (escrowed for a period) to get the pilot started without the city initially expending funds. The pilot investment would be placed with the chosen custodian according to the security protocols. It would then be left for a defined trial period (e.g. one budget year), during which staff monitors its value, tests the reporting procedures, and ensures the custody relationship works smoothly. The purpose is to iron out any kinks on a small scale. For example, the finance department can practice recording unrealized gains/losses, and the committee can simulate decision-making (like how to handle if value doubles or halves). By the end of the pilot period, the performance and process can be reported to Council. If it went smoothly, this builds the case for scaling up the allocation; if there were issues, the city can course-correct or reconsider. This pilot should be structured as an experiment with pre-defined risk limits (e.g. if BTC value fell by more than X%, triggers a review) to reassure stakeholders that it’s tightly managed. It effectively functions as a real-money sandbox to prove the concept.

During Phase 2, the city should document lessons learned at each step. For instance, Fort Worth noted the importance of working closely with regulators and the community in their mining pilot – Culver City can maintain an open dialogue with the community throughout the pilot, perhaps via a public dashboard showing the Bitcoin holdings and mining progress (for transparency).

Phase 3: Evaluation and Scaling (Months 18-24)

After one or more pilots have run their course (likely by the 18-month mark or sooner), the Bitcoin Task Force will compile results and recommendations. Key questions to evaluate: Did the pilots meet their objectives (operational feasibility, security, public acceptance)? What unforeseen challenges arose? How did the Bitcoin market behave during the period, and how would that have affected a larger holding? With this data, the task force can make an informed recommendation on whether to proceed to a broader implementation.

Possible outcomes of evaluation:

• If pilots are successful and legal hurdles are surmountable, propose a plan to institutionalize the Bitcoin strategy – e.g. formally allocate a certain percentage of reserves to Bitcoin over the next budget cycle, expand acceptance of crypto payments citywide, etc. This would involve updating the City’s Investment Policy to include digital assets (with all the constraints and oversight we’ve discussed). The policy might mirror New Hampshire’s law by capping the allocation (for example, “City may invest up to 5% of its idle funds in cryptocurrencies with market cap over $500B, i.e. Bitcoin, under strict custody and reporting requirements” ). The proposal would go to City Council for approval.
• If the pilots revealed significant problems or if the market/regulatory environment turned unfavorable (say a new state prohibition or a major crash raising too much risk), the city could pause or discontinue the initiative. The beauty of the phased approach is that the city can opt-out early with minimal loss if needed. It is important to approach the evaluation honestly; if the evidence suggests the city isn’t ready or the time isn’t right, it can table the plan and revisit later when conditions improve.

Phase 4: Full Implementation (Year 3 and beyond)

Should the city decide to move forward, Phase 4 is execution of the full Bitcoin treasury strategy as approved. Components of the full program might include:

• Gradual Allocation: Instead of buying in one lump sum, Culver City would acquire Bitcoin in tranches over, say, a 6-12 month period (dollar-cost averaging as mentioned). This reduces the impact of short-term price swings on the entry point. Purchases would be timed and sized according to the city’s cash flow situation (e.g. perhaps using a portion of any budget surplus or specific reserve funds authorized by Council). For transparency and accountability, the city can publish a schedule or range of how much will be purchased per quarter, without trying to “time” the market but following a rule-based approach.
• Ongoing Management & Monitoring: The internal Treasury Committee continues to oversee the holdings. Public reporting could be done via quarterly investment reports that now include a section on digital assets. The report might show: amount of BTC held, acquisition cost, market value, percentage of total portfolio, any transactions in the quarter, and narrative context for significant moves. This keeps Council and the public informed. If at any point the volatility breaches comfort levels, the policy could allow temporary halting of further purchases or even selling some portion – essentially a circuit breaker – although the core intent is to hold for the long term.
• Expanded Use Cases: With Bitcoin in the treasury, the city can explore utilizing it for community benefit programs. For example, interest earned or a portion of gains could be funneled into a “Culver City Innovation Fund” granting scholarships for STEM students or funding start-up incubators in the city. Another idea is to follow Miami’s lead and, if the reserve grows substantially, use some earnings to directly benefit residents (perhaps via a property tax rebate funded by Bitcoin gains in particularly good years). Additionally, the city could integrate cryptocurrency education into public library programs or partner with local schools, leveraging its unique position as a city that actually holds crypto. These measures ensure that the broader public sees tangible returns from the strategy, building long-term support.
• Regional Collaboration: Culver City might not be alone in this journey. By Phase 4, if successful, the city can share its model with neighboring cities or through organizations like the California League of Cities. A consortium or knowledge exchange could form, and collectively municipalities could even lobby for clearer state legislation to explicitly authorize crypto investments with appropriate safeguards. Culver City’s early mover experience would give it a leadership role in such discussions, amplifying the city’s voice in state policy making.

Pilot to Program – Flexibility is Key:

Throughout these phases, flexibility is built in. The city can adjust the timeline – for instance, extend a pilot if more data is needed, or accelerate the scale-up if conditions are very favorable. The multi-phase approach also means the city is never over-committed at any stage: each step provides a checkpoint to reassess. The plan accounts for the fact that laws and markets are evolving. If California passes a law in 2026 allowing municipalities to directly invest in crypto (not implausible given the trend in other states ), Culver City will be ready to act quickly, having done its homework and pilots. Conversely, if regulations tighten, the city can confine its activity to, say, just accepting crypto payments (which would by then be clearly legal) and hold off on investing.

Conclusion of Phased Plan:

By following this phased roadmap, Culver City can move from concept to reality in a responsible manner. Each phase builds capability and public confidence. Starting with small pilots – whether mining a few bitcoins or accepting some in payment – aligns with the prudent approach recommended by experts and allows the city to claim early victories (e.g., “Culver City successfully mined 0.5 BTC for its treasury in a green-energy pilot”). These wins can generate momentum and justify expansion. The phased plan mirrors how innovative governments implement new ideas: start small, evaluate, then scale.

In implementing this plan, Culver City will position itself at the forefront of municipal innovation while safeguarding the public interest. The end result, if executed well, will be a city treasury that is diversified, resilient, and future-focused, with Bitcoin as a strategic reserve asset alongside traditional holdings. This phased approach ensures that Culver City’s Bitcoin treasury strategy remains adaptable, compliant with law, and aligned with the city’s financial goals at every step.

Conclusion

Culver City stands at an opportunity to pioneer a well-considered Bitcoin treasury strategy that can protect and grow public funds, all while branding the city as a leader in technology and innovation. The rationale – hedging inflation, diversifying assets, and embracing the future of finance – is compelling when paired with strong governance and risk controls. Legal and regulatory review shows a cautious path forward: start within what is allowed (small pilots, third-party facilitation) and actively engage in shaping the regulatory environment for broader adoption . A robust risk management framework, including secure custody, volatility limits, and oversight, will ensure the city’s foray into digital assets is as safe as practicable .

Case studies from Fort Worth to Rio de Janeiro illustrate both the promise and prudence required – Culver City can learn from these to avoid pitfalls and capitalize on successes . Financially, while challenges exist, the potential upside and strategic benefits can significantly outweigh the costs if managed over a long horizon. By phasing implementation – from initial pilots to a gradual scaling – the city retains full control to adjust or pause as needed, ensuring that each step has political and public support.

In sum, this proposal charts a course for Culver City to responsibly integrate Bitcoin into its treasury. It is a forward-thinking policy that aligns with the city’s innovative spirit and fiduciary duty: balancing boldness with caution, and visionary goals with practical safeguards. With City Council’s guidance and community engagement, Culver City can become a model for how a municipality in California – and indeed the nation – can embrace the evolution of money in a way that is legal, secure, and beneficial for its residents. The establishment of a Bitcoin reserve, even a modest one, would signal that Culver City is not only ready for the future, but is helping to shape it, one satoshi at a time.

Sources:

• White House Executive Order on establishing a U.S. Bitcoin reserve (Mar. 2025) 
• Fidelity Digital Assets – Rationale for corporate treasury Bitcoin allocations 
• Government Finance Officers Association (GFOA) Advisory on Cryptocurrency (2022) 
• “Bitcoin & USD Tokens: What Municipal Attorneys Should Know” – Municipal Attorneys Institute (June 2025) 
• FinTech Weekly – California AB 1052 Crypto Payments for Government (2025) 
• Bracewell LLP – Texas SB 21 Strategic Bitcoin Reserve summary (July 2025) 
• Nasdaq/Bitcoin Magazine – Arizona Bitcoin & Digital Assets Reserve (May 2025) 
• LexisNexis Capitol Journal – State crypto reserve legislation (May 2025) 
• OneSafe Blog – Fort Worth Bitcoin mining pilot case study (July 2025) 
• CoinDesk – Rio de Janeiro 1% treasury Bitcoin announcement (Jan 2022) 
• StateScoop – City of Miami crypto initiatives and MiamiCoin (Nov 2021) 
• Thomson Reuters (Checkpoint) – GASB on crypto for governments (Apr 2022)