When the Houston Firefighters Relief and Retirement Fund bought $25 million in cryptocurrencies, with the fund’s chief investment officer touting their potential, retired fire Capt. Russell Harris was concerned.

Harris, 62, has attended the funerals of 34 firefighters killed in the line of duty. He was already worried about his pension after an overhaul by state and city officials cut payments as they grappled with the ability to pay out benefits. He didn’t see crypto, unproven in his eyes, as an answer.

“I don’t like it,” Harris said. “There’s too many pyramid schemes that everybody gets wrapped up in. That’s the way I see this cryptocurrency at this time. … There might be a place for it, but it’s still new and nobody understands it.”

The plunge in prices for Bitcoin and other cryptocurrencies in recent weeks provides a cautionary tale for the handful of public pension funds that have dipped their toes in the crypto pool over the past few years. Most have done it indirectly through stocks or investment funds that serve as proxies for the larger crypto market. A lack of transparency makes it difficult to tell whether they’ve made or lost money, let alone how much, and for the most part fund officials won’t say.

But the recent crypto meltdown has prompted a larger question: For pension funds that ensure teachers, firefighters, police and other public workers receive guaranteed benefits in retirement after public service, is any amount of crypto investment too risky?

Many public pension funds across the U.S. are underfunded, sometimes seriously so, which leads them to take risks to try to catch up. That doesn’t always work out, and the risk extends not just to the funds but to taxpayers who might have to bail them out, either through higher taxes or diverting spending away from other needs.

Keith Brainard, research director for the National Association of State Retirement Administrators, said he wasn’t aware of more than a handful of public pension funds that have invested in crypto.

“There may come a day when crypto settles down and becomes adequately understood and mature as a potential investment that public pension funds might embrace them,” Brainard said. “I’m just not sure that we’re there yet.”

The U.S. Department of Labor urges “extreme care” in crypto investments because of the high risks. The recent plunge in crypto prices has caused Washington to more closely scrutinize the freewheeling industry. After the collapse of $40 billion crypto asset known as Terra, senators in both parties have proposed legislation that would regulate crypto for the first time, and Treasury Secretary Janet Yellen has called for more oversight of crypto ventures.

The Houston Firefighters Relief and Retirement Fund’s cryptocurrency investment wasn’t very big — just $15 million in what was then a $5.5 billion portfolio.

It’s not clear how that panned out in the cryptocurrency market slide this year. Officials from fund and the union didn’t respond to multiple requests for comment. But the fund bought in when bitcoin prices were close to their peak of nearly $67,000, and they’ve been on the decline since then, dipping below $20,000 in June.

The fund’s chairman, Brett Besselman, said in a first-quarter report that it was healthy with an overall rate of return of 33.7% in 2021. Houston Mayor Sylvester Turner said earlier this year that the 2017 overhaul is working well and, thanks to strong returns in 2021, has put his city’s pension funds well ahead of schedule toward eliminating their unfunded liabilities.

Houston’s experiment, which fund managers touted as the first announced direct purchase of digital assets by a U.S. pension plan, followed a series of bigger but indirect investments by two pension funds for Fairfax County of Virginia. They put over $120 million into funds that seek opportunities in the crypto world, such as blockchain technology, digital tokens and cryptocurrency derivatives. As in Houston, the Virginia investments are a tiny share of the funds’ $7.2 billion in assets.

Since 2018, the Fairfax County Employees’ Retirement System and Fairfax County Police Officers Retirement System have put money into venture capital funds that invest in blockchain and a hedge fund that seeks to harness some of the volatility inherent in the space, said Jeffrey Weiler, executive director of Fairfax County Retirement Systems. He said the goal was to invest in infrastructure that underlies blockchain technology, which managers continue to view as a high-growth area.

Crypto-related investments aren’t necessarily deliberate. The Minnesota State Board of Investment manages a portfolio worth around $130 billion for several public employee pension plans and other entities. A recent report shows it held small stakes as of Dec. 31 in the crypto exchange Coinbase Global and the bitcoin miners Riot Blockchain and Marathon Digital Holdings with a combined market value of $5.3 million. It also listed two holdings of fixed-income securities from Coinbase with a market value of $2.2 million.

Mansco Perry, the board’s executive director and chief investment officer, said the board invests heavily in stock indexes, so those holdings were most likely in one of its index funds or were purchased by an outside investment manager.

“We don’t own cryptocurrency, but if a company is big enough to be in an index, more than likely we own it,” Perry said.

The Minnesota board may look at crypto-related investments someday just to learn about them, Perry said, “but it’s not a high priority. … I would say we’re nowhere close to making an investment decision to move forward, but that doesn’t mean we never will.”

The country’s largest public pension fund, the California Public Employees’ Retirement System, known as CalPERS, took a tiny stake in 2017 in Riot Blockchain that grew to over $1.9 million by late 2020. Securities and Exchange Commission filings show it reached $5.4 million before CalPERS got out sometime in the second quarter of 2021. Officials declined to give details, but it was a miniscule play in CalPERS’ total portfolio of well over $400 billion.

According to SEC filings, the State of Wisconsin Investment Board apparently began testing the waters early last year with purchases of Coinbase, Marathon and Riot Blockchain. Those holdings grew to at least $19.3 million, against a total portfolio of $48.2 billion, by the end of the first quarter this year. Board officials did not respond to requests for comment.

New Jersey’s main state pension fund appears from SEC filings to have started investing in some crypto-related stocks in the second quarter of 2021. As of the end of March 2022, the state had about $9.5 million in combined holdings in Coinbase, Riot Blockchain and Marathon. New Jersey state treasury officials said they don’t comment on specific investments.

Other public funds that have taken smaller stakes include the Utah Retirement Systems, which once held a $13.2 million stake in Coinbase but doesn’t anymore. The Pennsylvania Public School Employees’ Retirement System held as much as $2.6 million worth of Coinbase last summer but was down to $681,000 by the end of the first quarter, after selling most of its stake, while adding about $398,000 worth of Marathon starting in the second half of 2021.

Harris, the retired Houston fire captain, said he sees his pension as a contract that should be honored, given the risks that firefighters routinely take. While he’s generally happy with how his pension fund has performed, he’s still uneasy about crypto. He also points out that firefighters in Houston and many other U.S. communities generally aren’t eligible for Social Security.

“There’s just a lot of people out there, if they lose that pension it’s over,” Harris said. “Some of these older retirees, I just do not know how they’re surviving.”