Retirement Savers Could Soon Have Access to Bitcoin ETFs
Retirement savers who want exposure to bitcoin but don’t want to own the cryptocurrency directly may soon have a solution. U.S. regulators are nearing a decision on whether to allow a spot bitcoin exchange-traded fund (ETF) that would track the real-time price of bitcoin. Industry participants, including asset manager BlackRock, are optimistic that the U.S. Securities and Exchange Commission will approve these ETFs. If approved, retirement savers could gain access to crypto through their company 401(k) plans or self-directed IRAs. This move is seen as a significant step toward mainstream adoption of bitcoin and cryptocurrency.
Options for Owning Crypto in Retirement Accounts Are Limited
Currently, owning crypto within retirement accounts such as 401(k)s and IRAs is limited due to hesitancy from employers and regulatory concerns. Most people who own crypto do so outside of retirement accounts through self-custody or exchanges like Coinbase or Gemini. However, if spot bitcoin ETFs are approved, more providers are expected to offer them, giving retirement savers more options to invest in crypto within their retirement accounts.
If SEC Approves Bitcoin ETFs, What Happens Next?
If the SEC approves spot bitcoin ETFs, more companies may choose to offer them within their 401(k) plans. However, there may still be hesitancy from employers due to Department of Labor concerns outlined in its March 2022 guidance. The Department of Labor has expressed concerns about exposing retirement plan participants to direct investments in cryptocurrencies. It remains to be seen how quickly employers will adopt spot bitcoin ETFs.
Spot Bitcoin ETFs Likely to Gain Widespread Adoption
Mainstream custodians like Schwab and Fidelity currently do not allow direct investments in cryptocurrencies within retirement accounts. However, market watchers predict that once spot bitcoin ETFs are available, more custodians will offer them. This would provide retirement investors with greater access to bitcoin as an asset class.
Tax Advantages for Long-Term Crypto Investors
Investing in bitcoin through a retirement account can offer tax advantages compared to a brokerage account. Retirement accounts allow investors to defer taxes on the investment until withdrawal, and if held in a Roth IRA, withdrawals may be tax-free. In contrast, selling a spot bitcoin ETF would likely result in a cash redemption and potentially subject the investor to capital gains taxes.
Options If Your Employer Doesn’t Offer a Bitcoin ETF
If your employer doesn’t offer a spot bitcoin ETF in their 401(k) plan, you can open an IRA with a provider that offers these ETFs. Spot bitcoin ETFs will be eligible for use in various types of IRA accounts and solo 401(k) plans. Financial advisors may recommend buying these ETFs inside an IRA due to the potential for outsized returns.
Hot Take: Retirement Savers Could Gain Access to Bitcoin Through Spot ETFs
The approval of spot bitcoin exchange-traded funds (ETFs) could be a game-changer for retirement savers looking to invest in cryptocurrencies. With more than 10 asset managers working on their version of a spot bitcoin ETF, it’s likely that these offerings will become available soon. This would give retirement savers more options to invest in crypto through their retirement accounts. While there may be hesitancy from employers and regulatory concerns, the potential mainstream adoption of bitcoin and cryptocurrency is significant. It remains to be seen how quickly employers will embrace spot bitcoin ETFs, but it’s clear that they have the potential to revolutionize retirement investing.
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