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Crypto IRA – Do I Have Access to My Private Keys?

Key Points
  • Crypto IRAs are legal
  • Private v Public Key is an important distinction
  • IRA Financial can help you

There is a well-known saying among crypto enthusiasts – “no keys, no cheese.”    The idea behind this phrase is that without having total control over your Crypto IRA private keys you don’t really have complete ownership of the cryptos.  Unfortunately, when it comes to a Crypto IRA, holding your IRA private keys is not so simple.

Crypto IRA & The IRS

Even though Bitcoin is labeled as a “cryptocurrency”, from a federal income tax standpoint, Bitcoin and other cryptocurrency are not considered a “currency.”   In Notice 2014-21, the IRS offered guidance on the tax treatment of cryptocurrency. The IRS Notice was clear that virtual currency, such as cryptocurrency, should treated as property for U.S. federal tax purposes, just like stocks or real estate.  Therefore, since an IRA and 401(k) plan can invest in capital assets, such as stocks and real estate, a retirement account is permitted to invest in cryptocurrency.

What is a Crypto IRA?

A Crypto IRA is a type of Self-Directed IRA that allows one to invest in cryptocurrency.  There are a variety of different types of Crypto IRAs.  The most common is a Crypto IRA where a crypto account is opened at a regulated exchange, such as Bitstamp, and the IRA owner has direct control over the crypto investments.  The IRA is custodied by a Self-Directed IRA custodian, such as IRA Financial, while the cryptos are held for custody at Bitstamp, for example.

Below is a breakdown of the various type of crypto IRA solutions and the corresponding crypto exchange options available.

  1. Use of an LLC (Checkbook Control)
  2. Direct Crypto Investment

Crypto IRA LLC

The only legal way to purchase cryptocurrencies is through a regulated crypto exchange. However, most crypto exchanges do not offer one the ability to open an IRA. Using an LLC, wholly owned by an IRA, has become a popular way to purchase cryptos. Opening a Crypto IRA using an LLC will allow the IRA owner to essentially use any cryptocurrency exchange they wish to buy and sell cryptos, in the U.S., as well as globally. 

In addition, using a Crypto IRA LLC solution will allow the IRA owner to hold the crypto private key on a cold wallet.  In light of the FTX meltdown, holding one’s private key has become almost a necessity from a security standpoint.  This is especially important when one owns cryptos in a retirement account. Moreover, using a Crypto IRA LLC solution would allow one to open a crypto exchange account at a foreign exchange and purchase XRP and other cryptos that may not be available in the United States.  Although, one should be cautious about holding cryptos on a foreign exchange, especially considering of FTX.

Here’s how it works:

  • Individual opens an IRA at IRA Financial, a regulated Self-Directed IRA trust company
  • The IRA would own 100% of the LLC and IRA owner would serve as manager of the LLC
  • You, as manager of the LLC, would open an account with any crypto exchange
  • You would open the LLC account at the crypto exchange (i.e. Coinbase or Binance)
  • The LLC’s bank account would be linked to the crypto exchange account
  • You would have total control over the account and can hold cryptos on the exchange or pull cryptos off the exchange and hold in a cold wallet

Crypto IRA Direct

We are very proud to have the industry’s best solution for buying Bitcoin and other major cryptocurrencies on an exchange in the name of an IRA or 401(k). IRA Financial was the first self-directed IRA company to allow their clients to invest in cryptocurrencies, such as Bitcoin, directly via a cryptocurrency exchange without the need for a third-party broker or the use of an LLC.  Now, investors can use their retirement funds to buy all the major cryptocurrencies directly through Bitstamp, one of the leading US cryptocurrencies exchange.  Bitstamp was founded in 2011 and is present in over 100 countries, with offices in the UK, Luxembourg, the USA, Singapore, and Slovenia, and caters to over 4 million customers across the globe.

The IRA Financial crypto solution is the first to allow retirement holders to hold cryptocurrencies in an IRA directly on an exchange.   The account is opened in the name of the IRA but controlled by you as the authorized representative on the account.  The IRA holder has 100% control over the account and can trade anytime. 

How Does the IRAFI-Bitstamp Crypto Solution work?

Step 1: Open an IRA or Solo 401(k) account at IRA Financial Trust

Step 2: Move IRA or 401(k) funds to new IRA Financial account tax-free

Step 3: Funds are moved From IRA Financial to Bitstamp

Step 4: Begin buying and selling cryptos 24/7 on your own without the need for any broker or the use of an LLC on the IRA Financial app*.

With the Crypto IRA direct solution, you control the purchase and sale of Bitcoin (and other cryptocurrencies) directly. In other words, you do not need a costly broker or LLC. In addition, the cryptos will be held in the name of the IRA custodian. This will be in the benefit of the IRA holder. As a result, it’s much cleaner from a tax reporting perspective.


  • No requirement to use broker
  • No requirement to use LLC
  • Ability to buy, sell, or exchange cryptocurrencies at anytime through a PC or mobile application*
  • Flat low annual IRA custodian fee – no asset valuation fees


  • You can only purchase the most popular cryptocurrencies.
  • The cryptos must be held on the Bitstamp exchange

What is a Crypto IRA Private Key?

The concept of cryptocurrency keys is to verify that a spent transaction was indeed signed by the owner of the funds and was not forged. When one owns cryptocurrencies, controlling the private key demonstrates your ownership of the associated cryptocurrency. In essence, your private key unlocks the right for the crypto owner to control the associated cryptocurrencies and, thus, have the power to spend it. Since the private key is the pathway to access to your cryptocurrencies, it should remain private. Hence, gaining control of your crypto’s private key is a common way to ensure a higher level of security for the underlying cryptocurrency.

The crypto public key is akin to a username, and identifies the wallet so that other parties know where to transfer coins during a transaction. Whereas, the private key is similar to a password, and is the wallet’s owner’s special access code which acts as a security device to help make sure others cannot access the cryptos stored within.

In light of the recent developments in the cryptocurrency industry, specifically the recent bankruptcies of FTX, Blockfi, Celcius, and Voyager, many crypto investors have looked to take control of their private key as a way to best protect their cryptos from exposure to crypto exchange risks. This is especially true for many retirement investors who want to better safeguard their hard earned retirement investments from loss. We know that the party that controls the private key of the corresponding crypto has control and ultimate ownership of that coin.  Accordingly, since a centralized exchange controls the private keys of the coins purchased from that exchange, a surge of retirement crypto investors have been looking to find a solution that allows them to control the private keys of the cryptos owned in their retirement account. The Crypto IRA LLC solution is the only solution that will allow IRA or 401(k) investors to take control of the private keys associated with the cryptos owned in their retirement account.

What is a Cold Wallet?

The onus to keep your cryptocurrency secure typically falls on the Crypto IRA owner. The Crypto IRA owner must decide how to store Bitcoin and other cryptocurrency tokens in the safest, most secure way possible.

For a Crypto IRA investor, crypto wallets operate in a similar way to traditional wallet most of use to hold cash and credit cards. In the crypto universe, wallets can be thought of as a storage device for cryptocurrency tokens. A crypto wallet can be a physical or digital medium for storing your crypto public and private keys.

A cold storage wallet is essentially a storage devices like a USB drive which are used to keep the crypto public and private keys. Such devices, such as a Ledger Nano, can be kept safe in a safe or deposit box to make sure that they don’t fall into the hands of any bad actors.

Hardware cold wallets, such as the Ledger Nano, are becoming the most popular way to secure a wallet in an offline mode not connected to the internet. These are small devices which are water and virus proof and even support multi signature transactions.  Many Crypto IRA investors wish to hold their IRA owned cryptos in a cold storage wallet for security purposes, however, a recent tax court case creates some complexity for Crypto IRA investors.

The McNulty Case

In McNulty v. Commissioner, 157 T.C. No. 10 (November 18, 2021), the tax court ruled that an IRA owner cannot take personal possession of an IRA asset and cannot have unfettered control over any IRA asset.  The McNulty case involved a taxpayer who used a Self-Directed IRA LLC to invest in precious metals and real estate.  The McNultys decided to take personal possession of the IRA-owned coins, which violated a provision in the tax code. 

However, the tax court’s opinion focused on the taxpayer’s personal possession of the IRA-owned metals, which can have significant implications for Crypto IRA owners who wish to hold their cryptos in a cold wallet.  The tax court did not reference cryptos in the written opinion, however, since cryptos can be held physically in a cold wallet, the court’s ruling in McNulty seemingly would prohibit a Crypto IRA owner from holding the cryptos in a cold wallet in his or her personal possession.

On the other hand, unlike metals, cryptos are not tangible and are a new type of digital asset. Cryptocurrency is intangible but when its private keys are held in a cold wallet, it can be tangibly controlled by the IRA owner. This is why applying IRC 408(m) and the principles of the McNulty case to holding cryptos on a cold wallet may not be an accurate comparison. In addition, there is a real security risk to holding cryptos on an exchange. The cryptos owned in an IRA are visible on a blockchain.  In other words, when one buys cryptocurrency, the public address of the coin can be found on a blockchain.  The blockchain provides accountability and transparency for investors but also to the IRS.  Hence, unlike gold, which cannot be traced by the IRS if held personally, cryptos held on a cold wallet can be traced on the blockchain providing the IRS with the ability to audit and trace the movement of any crypto.

In sum, the opinion in the McNulty case seems to apply a broad requirement that an IRA owner does not gain unfettered command over any IRA assets.  The McNulty case was based on the personal possession of metals and coins, which IRC 408(m) clearly states must be held in the physical possession of a U.S. trust company.  Moreover, the fact that cryptocurrency is a new intangible asset class that due to its cryptography makeup has a real security necessity to take physical control over such asset via a cold wallet.  Unlike metals, because blockchain technology offers full transparency to the movement of any cryptocurrency, holding cryptos in a cold wallet will still provide the IRS with the ability to audit the movement of said crypto. However, there is currently no direct IRS guidance on the ability of a retirement account holder to hold retirement account owned cryptos on a cold wallet.


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