Use Your IRA to Invest in Cryptocurrency

You Can Invest in Cryptocurrency with Your IRA or Old 401(k)

Cryptocurrency provides a way to trade goods and services across the globe without government regulation or centralized oversight. Cryptocurrency (or digital) transactions are performed on self-regulating platforms that are visible for the public to see. This self-regulation ensures stability, prevents double spending, and helps create longevity to ensure value as a viable currency or asset within the broader scope of e-commerce.

Digital currency is bought and used by individuals, vendors, businesses, and even countries who allow its use. Investing in cryptocurrency like Bitcoin, Litecoin, Ethereum, and others is possible in a self-directed IRA. Profits earned in a self-directed IRA with cryptocurrency are paid directly to the IRA without any taxable liability other than those that apply when you retire.


Two Ways to Invest in Cryptocurrency with Your IRA

Set-up a Checkbook Control LLC

  • Creating an LLC allows you the freedom to direct investments with the trading platform as you see fit.
  • LLCs benefit from nearly universal acceptance with trading platforms making it a seamless way to establish your trading profile and transfer money to the platform.
  • The LLC must be a newly formed entity that is owned solely by your IRA.

Invest Directly Through Your IRA

  • Your IRA can invest directly into cryptocurrency by setting up a trading profile in the name of your IRA.
  • The IRA must be titled in the name of your IRA.
  • The trading platform must accept the account deposit from Advanta IRA as a third party.
  • If your platform is not sure if they can hold an account for an IRA, please contact us and we can speak with them about the process.

Benefits of Digital Currency in an IRA

When you trade cryptocurrency personally, you are required to report any gains on your tax return. You must also report goods or services you purchase with crypto. When you’re investing in the fast-paced environment of digital currency, this can be quite time-consuming to properly track.

But, when you trade crypto as an investment in a self-directed IRA—the gains enjoy tax-free growth in the account. For example:

  • If you have a Roth IRA, earnings are not subject to tax when you take distributions in retirement provided you are over 59 ½ and have owned the account for 5 years.
  • With a traditional IRA, earnings are tax deferred. You pay tax when you take distributions in retirement.

How the Process Works in an IRA

  • Choose a platform that can title the ownership in your IRA’s name.
  • Cryptocurrency may not be purchased personally and sold to your retirement plan.
  • The platform’s investing procedures must comply with IRS rules and regulations.
  • For income tax reporting purposes, digital currency is deemed personal property by the IRS as stated in Internal Revenue Bulletin 2014-16, Notice 2014-21.
  • When held in an IRA, it receives the same tax-sheltered treatment as any other investment in your retirement plan.

What Is a Self-Directed IRA?

Self-directed IRAs work the same way and follow the same rules as conventional IRAs. But, conventional retirement plan assets are limited to traditional investments (stocks, bonds, mutual funds) chosen or sold by the plan administrator.

Self-directed IRA investments are not restricted to stocks, bonds, and mutual funds like conventional IRAs are.

Self-directed plan owners choose their own assets, and they have access to a much broader category of alternative investments to the stock market like real estate, private equity, gold, and cryptocurrency.


Why Work with Advanta IRA?

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Low fees
Almost 20 years of experience
Nearly $2 billion in client assets under management

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