Key Points 

• The approval of Bitcoin ETFs allows indirect exposure to Bitcoin through traditional brokerages. You can also invest in Bitcoin ETFs with a Self-Directed IRA in some cases.
• With a Self-Directed IRA, diversification and direct ownership in cryptocurrencies offer more extensive investment choices and potential growth.
• Owning an IRA LLC gives you real-time control of your crypto investment decisions while enabling you to invest in Bitcoin ETFs.

In January 2024, a groundbreaking approval by the U.S. Securities and Exchange Commission (SEC) altered the Bitcoin and broader crypto landscape. Brokerage accounts can now invest in Bitcoin exchange-traded funds (ETFs), leaving many investors wondering about the implications for Self-Directed IRAs (SDIRAs).

In some cases, SDIRAs can have access to Bitcoin ETFs. Some SDIRAs are set up so that they’re administratively able to do so. It’s considered best practice to contact your custodian of interest to determine if they allow the investment of Bitcoin ETFs. SDIRAs continue to offer a unique advantage by allowing direct investment and tax advantages in a wide range of cryptocurrency.

How Does Bitcoin ETF Work?

Unlike traditional ETFs that may track stocks, indices, or commodities, a Bitcoin ETF holds the digital currency as an underlying asset. Investors can buy shares in the Bitcoin ETF through a regular brokerage account, essentially gaining indirect exposure to Bitcoin's price fluctuations without actually owning the coin. A Bitcoin ETF addresses some of the volatility and custody challenges that direct ownership can involve.

Can You Hold Bitcoin ETFs in a Self-Directed IRA?

In certain cases, you can hold Bitcoin ETFs in an SDIRA. It’s important to check if the SDIRA custodian you’re looking into is administratively set up to hold Bitcoin ETFs. However, you can hold Bitcoin itself, along with many other cryptocurrencies and alternative assets, in your SDIRA. Within these specialized retirement accounts, investors select from a broader range of investment options, including real estate, private placements, and much more.

Why Choose a Self-Directed IRA for Crypto Investments?

Just like standard IRAs, Self-Directed IRAs provide tax advantages on any potential gains. But while most standard IRAs are typically limited to Wall Street products like stocks, bonds, and mutual funds, SDIRAs open up the door to cryptocurrency and other alternative investments in a retirement account.

In addition to reduced tax liabilities, the ability to invest in multiple cryptocurrencies through your SDIRA allows for retirement portfolio diversification. Brokers offering Bitcoin ETFs offer only a narrow slice of the cryptocurrency market, while an IRA can hold a more comprehensive portfolio aligned with your own unique investment strategy.

What Is a Crypto IRA?

Another route for those looking to invest in both Bitcoin ETFs and cryptocurrency directly within an SDIRA is to establish a Self-Directed IRA with checkbook control, also referred to as a Checkbook IRA. This involves establishing an IRA LLC or IRA Trust along with a dedicated checking account to unlock the checkbook control feature for everyday investment transactions.

A Crypto IRA, sometimes referred to as a Bitcoin IRA or a Checkbook IRA, is essentially an SDIRA and its accompanying LLC or trust being used primarily for crypto investments. With a Crypto IRA, you get the tax advantages of an IRA while building a retirement portfolio diversified with cryptocurrency. Having an IRA LLC or trust is very convenient when it's time for distributions. You can retain the same coin wallet and simply transfer ownership from the IRA LLC to you.

To use a Crypto IRA to invest in Bitcoin ETFs, you’ll open a Self-Directed IRA with our sister company and SDIRA custodian, Madison Trust. You’ll then work with Broad Financial to get your entity (the LLC or trust) for your Crypto IRA set up. You’ll also go to the bank of your choosing to set up a checking account for your Crypto IRA. Finally, you’ll instruct Madison Trust to fund your new Crypto IRA checking account. From there, you can open up a brokerage account under the name of your Crypto IRA.

Whether you opt for a crypto-focused IRA LLC or a classic Self-Directed IRA, it’s important to work with a reputable custodian who is knowledgeable about the nuances of using a Self-Directed IRA for crypto investing.

So, What Does the Bitcoin ETF Approval Mean?

The SEC's decision to approve Bitcoin ETFs enables more investors to gain exposure to the intriguing crypto asset class. SDIRAs remain a valuable tool for diversifying your crypto holdings.

If Bitcoin ETFs are all you’re interested in, or if you prefer to directly hold your crypto, a Self-Directed IRA with Checkbook Control might be the right fit for you. Broad Financial can help you set up a Self-Directed Crypto IRA in a streamlined process, while helping you understand the requirements every step of the way. For more information, speak with a Broad Financial Specialist today.