Investing in cryptocurrencies such as Bitcoin, Litecoin, Ethereum and others is possible in a self-directed IRA. Profits earned in a self-directed cryptocurrency IRA are paid directly to the IRA without any taxable obligation other than those applied in retirement. If cryptocurrency is an asset that interests you, the good news is that you can invest in “cryptocurrencies” with your self-directed IRA (SDIRA). Whether you invest with your traditional or Roth IRA, your SDIRA allows you to combine a tax-advantaged strategy with a cryptocurrency investment strategy.
Cryptocurrency is a digital form of tokens or “coins” that can be exchanged for goods and services. Many companies issue their own digital currency that can be traded specifically for their goods or services. Blockchain is a highly secure technology that manages and records cryptographic transactions. There are many types of cryptocurrencies available, in fact, more than 6,700.
You can invest in cryptocurrency in a self-directed IRA. When you do, your profits go directly to the tax-free IRA. Some investors buy Bitcoin to keep them in the same way and for the same reasons as gold or other precious metals, which are also allowed investments within a self-directed IRA. Because cryptocurrencies are property, an IRA can purchase cryptocurrency by purchase without violating rules that prohibit IRAs from storing collectibles or coins.
This means that you can't contribute cryptocurrencies directly to your Roth IRA, but you can add them to your IRA through a purchase.