Can we invest in Cryptocurrency in SMSF?
Wondering if a self-managed superannuation fund Can we invest in Cryptocurrency in SMSF or not? The answer is “yes!” SMSF can invest in digital currencies in the same way they can in other assets such as property or shares, etc. The same rules apply to cryptocurrency as for other SMSF assets but with a few extra things to consider.
What is Cryptocurrency?
A cryptocurrency is a digital resource designed to work as a medium of exchange. In this individual coin, ownership records are stored in a digital ledger in the form of a computerized database using cryptography. This is done to protect transaction records, control the creation of additional coins, and verify the transfer of ownership. Cryptocurrency does not exist in any physical form like paper money.
What to consider when investing in Cryptocurrency in SMSF?
- When investing in cryptocurrencies, one must choose an exchange that accepts SMSF investments.
- They are considered high risks and aren’t backed by the government, it’s best not to have cryptocurrencies as your sole investment assent.
- It is important to make sure your digital currency is valued according to its market value. It is possible to obtain them from a currency exchange that publicly publishes the rates.
- For additional security and privacy, one can use a cold wallet (also known as an offline wallet) with a private key rather than an internet-connected one. (Ledger or Trezor are cold wallets that can be connected temporarily to the internet for transactions and then unplugged.)
If one uses a cold wallet, it must be registered under the fund’s name. It is also vital to keep a good record of it.
Keeping a good record of all transactions including buys sells, transfers from one exchange to another or transfer from an exchange to a wallet is crucial for the calculation of capital gain or loss.
While it is technically possible to invest in cryptocurrency via an SMSF, that doesn’t mean you should. OrangeIQ can provide you with the advice that you need.
