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What Crypto Exchanges Can I Use For My Crypto IRA?

Crypto-Exchange
3 Minute Read

A Crypto IRA is another name for a Self-Directed IRA that allows for cryptocurrency investments.  The Self-Directed IRA provider you select for your Crypto IRA will generally determine which cryptocurrency exchange you can use for your Crypto IRA investments.   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. Third-party broker
  3. Direct Investment
  1. Crypto IRA LLC

Most crypto exchanges do not offer the ability to open an IRA at a crypto exchange. The only legal way to purchase cryptocurrencies is through a regulated crypto exchange. 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.

Below is a breakdown of how it works

  • Individual opens IRA at Self-Directed IRA custodian
  • IRA would own 100% of the LLC
  • LLC would open an account with a crypto exchange
  • IRA owner would open the LLC account at the crypto exchange (i.e. Coinbase or Binance)
  • LLC’s bank account would be linked to the crypto exchange account
  • IRA owner would have total control over the account
  • Crypto IRA Broker

An unregulated third-party broker company will work with a Self-Directed IRA custodian to help clients buy and sell cryptocurrencies.  In this model, the individual opens an IRA at a Self-Directed IRA custodian and then directs the custodian to send the IRA funds to an unregulated third-party broker/company who will purchase the cryptocurrencies on an exchange for the client.  In this model, the IRA owner has no control over which cryptocurrency exchange is used and must use the exchange linked to the third-party broker.

With a third-party broker model, beware of high commissions on the purchase and sale of the cryptos as well as an annual holding fee.  This option is the least recommended by most legal and tax professionals.

  • Crypto IRA Direct

In this model, the IRA owner would open an IRA with a Self-Directed IRA custodian and then the Self-Directed IRA custodian would work with a crypto exchange to have the crypto account opened in the name of the IRA.  This is the preferred option because the account is opened in the name of the IRA which takes away any IRS reporting issue.  In addition, the IRA owner is not required to use an LLC or have to work with an expensive unregulated third-party broker.

IRA Financial has partnered with Gemini exchange to allow individuals to control their own crypto exchange account as the IRA owner without the need of an LLC or broker and the crypto account is titled in the name of the IRA.  Thus, IRA Financial will custody the IRA and Gemini will custody the crypto.  This model is the future of how individual IRA owners will buy cryptos in a retirement account because it is the least costly.

Gemini is a licensed New York trust company that undergoes regular bank exams and is subject to the cybersecurity audits conducted by the New York Department of Financial Services.  All crypto held online in our exchange wallet is insured and we use best-in-industry cold storage coverage with leading insurance providers.

Gemini offers over 70 cryptocurrencies with over $30 billion in assets under custody. 

Below is a breakdown of how it works

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

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

Step 3: IRA Financial creates your exchange account on Gemini. Gemini then emails you onboard instructions.  An IRA or 401(k) account is opened at Gemini (i.e. IRA Financial Trust Company FBO John Doe IRA).

Step 4: Funds are moved From IRA Financial to Gemini

Step 5: Begin buying and selling cryptos 24/7 on your own without the need for any broker or the use of an LLC.  Hold the cryptos on Gemini or in a cold wallet you control via a multi-signature wallet solution.

Advantages

  • Total control over private key
  • Ability to control fees – can select exchange of your choice
  • Trade 24/7
  • Low annual fees
  • No need for a broker or LLC
  • No IRS reporting issues since account is titled in name of an IRA
  • Can hold cryptos on the exchange or in cold wallet (offline)

Final Thoughts

Using your IRA or 401(k) funds to invest in cryptos has become a popular way for retirement investors to diversify their retirement portfolio, as well as gain exposure to an emerging asset class.  However, cryptos remain volatile and risky.  Therefore, when selecting the right Crypto IRA solution is important to ensure you are working with a regulated crypto exchange and be aware of the crypto trading commissions, as well as any annual value fees.

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[10:44 PM] Valerie Marszalek-Boik