Can Your IRA Invest In & Own Bitcoin and Other Cryptocurrencies?

Yes, your IRA can invest in and own bitcoin and other cryptocurrencies. Bitcoin is a form of virtual currency using blockchain technology. Bitcoin can be exchanged between people for goods, services and of course, dollars.
From 2011 to September 2017, the value of Bitcoin has risen from $0.30 per Bitcoin to a shocking $3,772 per Bitcoin. As a result, investors are beginning to seriously consider whether their retirement account can invest in and own actual Bitcoin or other forms of cryptocurrency. Maybe you are too, now that you just read that. I can't blame you.

Can Your IRA Own Bitcoin?

Yes! Your IRA can own Bitcoin and other forms of cryptocurrencies, such as Ethereum and Litecoin. The only items your IRA cannot invest in is life insurance, S-Corp stock and collectibles.

How Are Bitcoin Gains Taxed?

The IRS has stated that Bitcoin and other forms of virtual currency are property. The sale of property by an IRA is generally treated as capital gain, so the buying and selling of cryptocurrency for investment purposes wouldn’t trigger unrelated business income tax (UBIT) or other adverse tax consequences that can occasionally arise in an IRA.

3 Steps To Owning Cryptocurrency With Your IRA.

  1. First, you will need a self directed IRA with a custodian who allows for alternative assets, such as LLC's.
  2. Second, you will invest funds from the IRA into the LLC. Your IRA will own an LLC 100%, and that LLC will have a business checking account.
  3. And third, the IRA/LLC will use its LLC business checking account to establish a "wallet" to invest and own Bitcoin through the wallet. The most widely used Bitcoin wallet is through a company called Coinbase. You can use a wallet on Coinbase to buy, sell and digitally store your cryptocurrency.

There are already publicly traded funds and other avenues (Bitcoin Trusts) where you can own shares of a fund that in turn owns Bitcoin. But, if you want to own Bitcoin directly with your IRA, you’d need to follow the steps above.
Don't underestimate Bitcoin and other forms of cryptocurrency. You're living in the digital age now. Cryptocurrencies have great potential, as of this writing one Bitcoin is worth $3,772 , almost triple that of an ounce of gold. Times change.
However, as with any new investment, make sure you proceed with caution. Who knows, by the time you read this article, Bitcoin could be worth nothing, or it could be well on its way to being the "currency of the future". Just to give you an idea, the value of Bitcoin is about as volatile as a Dutch Tulip...(pictured below, click the link if you don't know about "tulip mania")

Last Updated: 
November 5, 2017

Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.

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