What Is a Bitcoin Custodian?
The IRS requires that all individual retirement accounts (IRAs) have either a custodian or trustee. The custodian can be a financial institution or nonbank entity approved by the IRS. As the overseer of your IRA, the custodian buys and sells assets for your account, maintains records of transactions, and files any necessary reports for tax or other purposes. Essentially, the government wants to help ensure that citizens’ life savings are managed responsibly.
For Self-Directed IRAs, some custodians specialize in specific types of assets, such as precious metals or cryptocurrency, to help investors navigate the process of transacting and storing such alternative investments. Having a custodian that specializes in cryptocurrency IRAs oversee your IRA may help keep your digital assets more secure. Such Digital IRA custodians may:
- Offer services to securely store crypto assets on cold storage devices in monitored vaults
- Insure digital assets against theft or other types of loss
- Ensure compliance with cryptocurrency storage security standards (CCSS)
When choosing a custodian for your crypto IRA, you may want to look for services such as the ones listed above. Keep in mind that there may be a delay of a few days for a custodian to process a cryptocurrency transaction in your IRA, though there is no financial penalty from the IRS for trading such assets back and forth in your IRA.
BitIRA’s custodian partners are Equity Trust Company and Preferred Trust Company.
Equity Trust Company
Equity Trust Company is a premier custodian specializing in alternative assets in tax advantaged portfolios. Since its inception in 1974, Equity Trust has simplified the investment process, offering investors optimized solutions, processes, and service.
The Equity Trust Process
Equity Trust Company tends to your custodial and administrative needs by providing the following.
- Investment Freedom – Investors have the ability to customize their portfolio to include both alternative and/or traditional investments. The platform also allows investors to gain new insights though its educational resources.
- Innovative Technology – Through the myEQUITY online account management system, investing is intuitive, allowing for investors to easily manage and engage with their account.
- Recognized Leader – With 45 years of financial service experiences, Equity Trust is well known and has established solid relationships with over 150,000 investors, fostering custody over 28.7 billion in assets.
- Service Excellence – Equity Trust Company has over 400 employees ready to assist investors with their custodial needs. In 2018, Equity Trust competed 1.2 million transactions.
Preferred Trust Company
Formed in 2007, Preferred Trust Company is a licensed trust custodian which specializes in self-directed IRAs. They operate with a stated mission to “provide individuals the opportunity to break down barriers of traditional investing in an IRA.” Preferred strives to go above and beyond in every transaction, and provide outstanding and professional service. Once BitIRA’s in-house IRA department has helped to ensure a smooth transition from your current custodian, Preferred Trust takes over the reins to administer your account.
The Preferred Trust Team
Preferred Trust is organized into the following teams, each of which will touch your account at various stages.
- Customer Service Team – Specializes in assisting customers with general account inquires. Experts in all aspects of the industry.
- Transfer Team – Works with you, our BitIRA in-house IRA Department and your prior custodian to seamlessly transfer funds.
- Investment Team – Facilitates processing of your investment choice for placement into your IRA.
- Accounting Team – Processes all IRA payments, contributions, distributions, account statements, and tax documentation.
Should you hold any cash deposits in your account with Equity Trust Company, up to $3.75 million will be covered by the FDIC. If your cash deposits are held with Preferred Trust Company, up to $250,000 will be covered by the FDIC. Please note, as with any asset, FDIC insurance does not insure your digital currency investment(s).
Once your account is open, you’ll buy and sell cryptocurrencies through the Genesis exchange (learn more about cryptocurrency exchanges).