Cryptocurrency IRA Frequently Asked Questions

A Cryptocurrency (also known as digital currency) IRA works much like any other individual retirement account. You can make regular, tax-advantaged contributions to an IRA that is set up and administered by a custodian. However, rather than investing in traditional investments like stocks and bonds, you invest your savings in digital currency. You can also choose to roll over assets from an existing retirement account into a self-directed Cryptocurrency IRA.

Investing in cryptocurrencies through a Cryptocurrency IRA is just like investing in any other IRA, and is most analogous to a Precious Metals IRA. Once you determine how your Cryptocurrency IRA will be funded and transfer funds to the IRA, you can purchase cryptocurrencies with those funds. Those digital assets will be stored in the possession of your Cryptocurrency IRA custodian.
To be eligible to establish an account, you must:
  1. Be a US Citizen.
  2. Have a legal address located within the United States.
  3. Be over the age of 18.
  4. Be able to provide a statement for the account(s) you will be funding your new account from.
For an IRA transfer, make sure that the amount you want to transfer from your existing IRA account is already liquidated and sitting in an uninvested cash position, and provide an account statement or document that shows:
  • The name and phone number of your current custodian from your statement or online access
  • Your name EXACTLY as it appears your account registration (for example Mr. John Smith, Sr. versus Mr. John Smith, III)
  • Your account number and the type of account (e.g., Roth or Traditional IRA)
For a rollover from a 401k or other employer-sponsored plan, provide an account statement or document that shows:
  • Your plan details and account number
  • The name and phone number of your current plan administrator or trustee from your statement or online access
  • Your name EXACTLY as it appears your account registration (for example Mr. John Smith, Sr. versus Mr. John Smith, III)
Transactions in most major cryptocurrencies, such as Bitcoin, Litecoin, and Ethereum, are recorded in a blockchain, a publicly accessible ledger. All transactions are confirmed and recorded in the blockchain through the cryptocurrency mining process. That record is permanent and cannot be changed, altered, or hacked. As you purchase cryptocurrency for investment purposes, your custodian will keep track of the units that you own.
All IRAs require a custodian, whether they invest in stocks and bonds, gold and silver, or cryptocurrencies. Your custodian administers and tracks the assets in your IRA so that you can comply with all IRS rules and regulations and maintain all the tax benefits of your Cryptocurrency IRA.
The IRS currently views Bitcoin, Litecoin, Ethereum, and similar cryptocurrencies as property, allowing them to be purchased and held in a Cryptocurrency IRA. See IRS Notice 2014-21.
The same rules apply to Cryptocurrency IRAs as with any other IRA. They may be Traditional, Roth, SEP, or Simple. Early distributions from any IRA before the age 59 ½ may trigger penalties in addition to any income taxes owed. Always consult a tax professional for advice on rollovers, transfers, contributions and distributions from any retirement account. If you are interested in learning more about how to invest in a cryptocurrency IRA, contact Coin IRA today.
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