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Is Bitcoin the Future of Higher Education Financing? How this university is testing the idea.
Bitcoin is a digital currency – or cryptocurrency – that is not backed by any government or central bank.
The University of Austin, a new school set to open later this year, has launched what it says is the first long-term endowment held in bitcoin, a unique involvement of the cryptocurrency in higher education financing.
The donation is organized in collaboration with Unchained, an Austin-based bitcoin financial service, whose founder and CEO, Joseph Kelly, donated the first two bitcoins to launch the campaign, equivalent to $138,000.
After securing it initial approval for launch by the Texas Higher Education Coordinating Council in November, the university plans to open this fall in the Scarborough Building downtown with 100 students. The private institution first announced plans to open in November 2021, positioning itself as a school against cancel culture and censorship and an innovative alternative to a national higher education model that it says And broken.
The university seeks to challenge higher education norms, including by establishing an endowment in bitcoin, a form of digital currency that can be sold and traded without a bank. The decentralized model requires that most of the bitcoin network approves transactions and that transactions are stored on a digital record called a blockchain.
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Chad Thevenot, senior vice president for advancement and communications at Austin University, said the new school is increasing its endowment resources and that this endowment will be part of a diverse portfolio with other titles and assets to support the future of the ‘university.
The new endowment will go toward general funding for the university but will be held in bitcoin for at least five years, he said.
The idea came about when he and Kelly, whose office is across the street from the university building, met to chat over coffee and lunch. When Thevenot heard Kelly’s talk about the endowment, he thought it was a great way to engage the bitcoin community.
“Bitcoin as an idea, as a phenomenon, captures the imagination of people at the university; it captures the imagination of our students,” he said. “In that sense, there is a natural formation.”
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The spirit of UC Austin fascinated Kelly, especially how the university wants to help students become entrepreneurs. The partnership, she said, can “build a bridge between communities.”
“The more I’ve heard about what they’re trying to do in terms of really keeping the light on areas of censorship or problems (in) the higher education system, a lot of people in the bitcoin community that we serve would also really benefit from hearing that message or taking advantage of knowing that UATX exists,” he said. “And then, like me, he might get excited (and) contribute.”
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Universities have been accepting cryptocurrency for years but they typically liquidate it to avoid volatility in its value. But by holding the endowment in bitcoin, the university will demonstrate belief in its value as an asset, Thevenot said.
“We’re not worried,” he said about the potential fluctuation in market value. “Every bitcoin we get is worth more than $0. Because the alternative is zero bitcoin.”
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David DeMatthews, an associate professor at the University of Texas College of Education who specializes in education policy, said the use of bitcoin as an endowment asset is new to him but not surprising, as endowment portfolios typically consist of an number of different types of goods. resources.
The $5 million “is not a substantial sum, considering how much it might cost to open a university, but it could be seen as a way to market bitcoin and other types of cryptocurrencies,” DeMatthews said.
Cesare Fracassi, a UT associate professor of finance who researches and teaches about cryptocurrency, said endowments held in bitcoin offer the advantage of attracting donors interested in cryptocurrency, but could face fluctuations in value over time similar to other technology stocks.
“Investing in bitcoin is as volatile as investing in Tesla,” Fracassi said. But he added that donating bitcoin has a tax advantage for donors over cash, similar to donating stocks and bonds to universities.
While bitcoin’s value has dropped significantly in the past, it has also increased significantly, said Shimon Lazarov, Unchained’s marketing director.
“Bitcoin is volatile, but it also has a huge upside,” Lazarov said. “I think $5 million over five years can definitely easily increase 10 or 20 times if you look at bitcoin’s past.”
What is the future of bitcoin in Texas?
Carla Reyes, an associate professor of law at Southern Methodist University who specializes in blockchain technology and former president of the Texas Work Group on Blockchain Matters, who sent a 84 page report of recommendations to the Legislature in 2022, said Texas is considered a top state in the industry, largely thanks to tech hubs like Austin.
Reyes said the university’s announcement is “very interesting” and rare because the endowment will be held in bitcoin.
“Universities are very risk averse and very wary of accepting donations or even granting cryptocurrency money in general, so I think it’s probably great for them to accept it and commit to holding it for five years,” Reyes said, adding that management of the endowment fund from Unchained should ensure the security of payments, which she says is often a concern among universities.
Reyes expects Texas will continue to innovate in blockchain technology and currencies because both the state and the industry share “an entrepreneurial and innovative spirit” and Texas lawmakers, industry professionals and researchers are interested in seeing its progress . He hopes the announcement will encourage other universities to form similar partnerships.
“Tokens and cryptocurrencies have a bad reputation, which they don’t deserve,” Reyes said. “And I think if universities don’t look beyond that to the real value of the technology and commit to finding partnerships… they’re going to miss the opportunity to grant money.”
With Bitcoin, Thevenot said, “we want to take this kind of risk and integrate with this kind of community in Austin.”
“It’s not just a resource,” he added. “It’s an ethic.”
This article originally appeared in the Austin American-Statesman: Cryptocurrencies to strengthen university resources? New private university experiment