Cryptocurrency in Roth IRA: How It Works


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Cryptocurrency in Roth IRA: How It Works

If you are a crypto lover and are wondering what to do next with your coins, investing in Roth IRA should be on your list. Although this is not something common, it is completely doable. You only need to open an account that offers the service.

The main advantage of investing your crypto in a Roth IRA is the tax benefits that come with it. In the sense that, if you decide to sell an investment that has increased in value, paying capital gain tax is not a requirement.

Considering the high risks involved in investing in cryptocurrencies, saving is important. But there is still the risk of losing it all.

Since Roth IRAs are not that common, many account holders do not offer direct savings of cryptocurrencies to the account but rather have other ways to ensure their user enjoy some benefits. They provide benefits such as investing in futures, and coin trust or you could also invest in stocks that have crypto exposure.


  • The user will enjoy the benefit of making profits on an account not taxable.
  • It increases your portfolio which will come in handy during future investments.


  • Since cryptocurrencies are highly volatile, it may not be a good idea to gamble your retirement benefits on a market that may fall.
  • For you to have full ownership of the account, you have to start small and work with a new custodian.
  • The fees charged by most providers are high. Deduction often ranges from 1% to 2% from every purchase or sale of the cryptocurrency. The good news is, custodians who are advanced will not charge trading fees.
  • Getting a financial advisor that is knowledgeable on the topic of cryptocurrency and IRA can be a challenge.

Relation Between Cryptocurrencies and Roth IRAs

Before we look at how the two relate, we need to understand what the IRS allows.

  • A Roth IRA is an individual account that allows its users to deposit money into the account for retirement purposes. When the account matures, the holders can withdraw the money without being subjected to any tax. Withdrawals made before the maturity date are penalized.
  • These accounts are regulated by bodies like the IRS (Internal Revenue Service) which controls how the accounts will be running and the types of investments that can operate within them.
  • Cryptocurrencies put into the Roth IRA account are not transferable. Also, new deposits are made in cash. 
  • Investors have to be keen when dealing with crypto and Roth IRAs. Many people assume IRS is responsible for approving, endorsing, and reviewing investments made under the Crypto-Roth IRA category. Which is not the case. So, any proposal stamped IRS approved or IRA approved should be looked at keenly.

Everything You Need to Know About Directly Owning Cryptocurrency.

This offer is not available on many platforms

For starters, this service is only offered by a few and mostly small platforms. It is also important to learn what is allowed in Roth IRA and what is offered by custodians.

Yes, the IRS has allowed crypto to be held in Roth IRA but that does not mean custodians have to offer this option. Custodians such as Charles Schwab, Vanguard, and TD Ameritrade do not.

But platforms like Bitcoin IRA, iTrustCapital, and Bit IRA have gone the other direction to allow their users to hold crypto in Roth IRA. 

However, these firms aim to concentrate on investing in cryptocurrencies. This means enjoying some other types of investments such as mutual funds, ETFs and stocks are off the table.

Transaction Fees 

Trading cryptocurrencies can be a challenge due to the high cost of the transactional fee. Other custodians are not forthright which makes traditional investment firms far much better than the latter. Other fees like startup fees may also apply when opening an account.

As seen earlier, it costs between 1% to 2% for each crypto transaction. Breaking this down, it means for every let’s say 1000 dollars bought in crypto and sold for 2,000 dollars, the charges will be $ 30 to $ 60.

Custodians that have large portfolios do not charge transaction fees. When investing your funds, it is important to note that investments such as exchange-traded funds and mutual funds have expense ratios.

For instance, if you had purchased a thousand dollars worth of funds that had an expense ratio of 0.02% and the value was rising by 100 dollars each year for 10 years, the transaction fee you would pay is 29 dollars to cover that decade.

It Is Advisable To Have A Separate IRA Account For Traditional Investments

Many people do not distinguish between crypto in IRAs with traditional investments. To begin with, a crypto IRA does not allow a user to hold traditional investments. If you want to have both, this is how to do it.

Open a Roth IRA account with more than one custodian. This way, you can deposit your money into these accounts. Considering the IRS limits the amount you can deposit to one Roth IRA account, having many accounts can come in handy since it does not limit the accounts one can have.

You could open two accounts. One to deal with Roth IRAs for traditional investment purposes and the other will deal with cryptocurrencies. Save 1,000 dollars and 500 dollars respectively.

Here are Other Ways You Can Own Crypto Directly  

If you are looking to expand your knowledge and investment in cryptocurrency without owning it directly, look for platforms that offer other services related to cryptocurrencies. Check out Fidelity and Charles Schwab to get started.


Having a crypto trust will get you a step closer to owning cryptocurrency in Roth IRA through traditional custodians. A crypto trust is a legal entity that you can invest in. The shares can be traded and purchased. 

Trust has made it easier to own cryptocurrencies. Unfortunately, products created out of this method are not easy to track especially when you are trying to record their prices. This market tends to be volatile and having clear records of it might be a challenge.


Cryptocurrencies have grown as a result of the infrastructure-both physical and digital brought about by openly traded companies. A good example is Coinbase, which is an openly traded company. Other companies such as PayPal and Block (which created the Square brand) are also on the verge of creating their upcoming businesses that offer crypto services.

Nvidia, a company that manufactures Chips, can also be related to crypto miners. If you are not cut out for the task of selecting ETFs like iShare’s Blockchain, Stocks and Tech ETF bundle, put several Crypto companies together and try investing in one product. 


Futures are another way to ensure you invest in cryptocurrencies indirectly. Unfortunately, one can’t hold any futures in crypto unlike in crypto trust. However, the investors are allowed to trade futures which gives them the advantage of selling and buying a product at their price.

Because of the uncertainty of future trading, the prices of the coin might fall behind. Futures can be traded directly or you can purchase an ETF that uses this method. 

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