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Can You Own Crypto in Your IRA?

Cryptocurrency, such as bitcoin, cannot be contributed to an Individual Retirement Account. However, it appears that an IRA may acquire cryptocurrency by purchase.

By Michael Jones

Money is generally defined as a medium of exchange and a storehouse of value or wealth. The volatility of cryptocurrency evidences its inability to be regarded as a storehouse of value; nor is it government-issued legal tender. It is, instead, an asset class other than money.

IRS Notice 2014-21, Q&A-1 states that, for federal tax purposes, cryptocurrency is treated as property, and not as currency, and so has income tax basis for purposes of measuring gain or loss upon occurrence of a taxable sale or exchange.

IRS Revenue Ruling 2019-4 does not discuss IRAs or section 408, but its definition of virtual currency makes clear that virtual currency is not "cash,” stating:

Virtual currency is a digital representation of value that functions as a medium of exchange, a unit of account, and a store of value other than a representation of the United States dollar or a foreign currency. Foreign currency is the coin and paper money of a country other than the United States that is designated as legal tender, circulates, and is customarily used and accepted as a medium of exchange in the country of issuance. See 31 C.F.R. §1010.100(m).

Cryptocurrency is a type of virtual currency that utilizes cryptography to secure transactions that are digitally recorded on a distributed ledger, such as a blockchain. Units of cryptocurrency are generally referred to as coins or tokens. Distributed ledger technology uses independent digital systems to record, share, and synchronize transactions, the details of which are recorded in multiple places at the same time with no central data store or administration functionality. (Emphasis added.)

Internal Revenue Code (“Code”) Section 408 authorizes Individual Retirement Accounts and defines the term “individual retirement account” to mean a trust created or organized in the United States for the exclusive benefit of an individual or that individual’s beneficiaries, provided that certain requirements are met.

Can Cryptocurrency Be Contributed to an IRA?

Section 408(a)(1) requires that contributions (other than rollover contributions) must be made in cash. Neither the Code nor the regulations under section 408 defines "cash." It seemingly means United States currency in the form of dollar bills, coins, or a check.

Since cryptocurrency is treated as property and so cannot be classified as cash, it cannot be contributed to an IRA.

Can an IRA Acquire Cryptocurrency by Purchase?

An IRA may not hold “collectibles”. If an IRA does so, Code Section 408(m) provides that such an acquisition is treated as a taxable IRA distribution.

§ 408(m)(2) defines the term, collectible to include: 

  1. any work of art,
  2. any rug or antique,
  3. any metal or gem,
  4. any stamp or coin,
  5. any alcoholic beverage, or
  6. any other tangible personal property specified by the Secretary for purposes of this subsection.

Tangible personal property means a thing that can be touched and that is not real property. Cryptocurrency can’t be touched; It’s traded only in cyberspace. Because cryptocurrency is intangible personal property and not tangible personal property, neither § 408(m)(2)(D) nor § 408(m)(2) (F) can apply. Consequently, cryptocurrency isn’t a collectible, so IRAs aren’t barred from holding Cryptocurrency under the anti-collectible rule.

Code Section 408(m)(3) provides an exception to the prohibition on ownership of any coin for certain coins and bullion, including any coin which is—

  • A gold coin described in paragraph (7), (8), (9), or (10) of section 5112(a) of title 31, United States Code,
  • A silver coin described in section 5112(e) of title 31, United States Code,
  • A platinum coin described in section 5112(k) of title 31, United States Code, or
  • A coin issued under the laws of any State,
  • Any gold, silver, platinum, or palladium bullion of a fineness equal to or exceeding the minimum fineness that a contract market (as described in section 5 of the Commodity Exchange Act, 7 U.S.C. 7) requires for metals which may be delivered in satisfaction of a regulated futures contract, if such bullion is in the physical possession of a trustee described under subsection (a) of this section.

Cryptocurrency meets none of those descriptions, so cryptocurrency is not a “coin” for purposes of Code Section 408(m). Thus, IRAs aren’t barred from holding Cryptocurrency under the anti-coin rule, and so may be owned by an IRA.

Revenue Ruling 78-406 states that the direct transfer of funds from one IRA trustee to another does not result in a payment or distribution of the funds for purposes of section 408(d)(1) of the Code. The Revenue Ruling also says its conclusion applies regardless of whether the bank trustee initiates such a transfer or the participant directs it. The Revenue Ruling further states that a transfer from one IRA bank trustee to another, even if directed by the participant, is not a rollover contribution to the recipient IRA for purposes of section 408(d)(3) of the Code because the funds are not within the direct control and use of the participant.

Thus, transfer of cryptocurrency from one IRA to another IRA by direct transfer will not cause a taxable IRA distribution of the cryptocurrency.


Because IRA contributions must be made only in cash, and because cryptocurrency isn’t cash under Notice 2014-21, cryptocurrency may not be contributed to an IRA. But, since IRAs may (and do) make investments, can an IRA acquire cryptocurrency by purchase?

When IRA rules were enacted, there was no such thing as cryptocurrency, such as bitcoin. As the law is written presently, the term “collectible” includes a “coin,” but only if it is of a type listed in § 408(m)(3). Cryptocurrency doesn’t fall within that definition because they are not coins, but, rather, are property, according to IRS Notice 2014-21. Because cryptocurrency is property, an IRA may acquire cryptocurrency by purchase without running afoul of rules prohibiting IRAs from holding collectibles or coins.

A criticism of cryptocurrency and blockchain is their consumption of electricity, and so are detrimental to the environment.


Cryptocurrency, such as bitcoin, cannot qualify either as either a “collectible,” under Code Section 408(m)(2), or a “coin,” under Section 408(m)(3), and so may not be contributed to an IRA. But, there is no prohibition against purchase of cryptocurrency by an IRA. Thus, cryptocurrency purchased and held by an IRA can be –

  • Rolled over within 60 days of distribution to another IRA, including to a Roth IRA in a Roth IRA conversion, provided that the type of cryptocurrency rolled over is the same type distributed;
  • Transferred by direct transfer from one IRA to another IRA of the IRA owner, under Revenue Ruling 78-406, 1978-2 C.B. 157, provided that the type of cryptocurrency rolled over is the same type as was distributed; or
  • Transferred by direct transfer to an IRA set up and maintained for the death beneficiary of an IRA (i.e., an inherited IRA) following the death of the IRA creator.

This article originally appeared in LISI Employee Benefits & Retirement Planning Newsletter #775 at and is reprinted here with permission. Cites: Internal Revenue Code Section 408; IRS Notice 2014-21, Q&A-1; IRS Revenue Ruling 2019-4; Revenue Ruling 78-406, 1978-2 C.B. 157.

About the author: Michael J. Jones, CPA

Michael J. Jones, CPA is a partner in Monterey, California’s Thompson Jones LLP (email: His tax consulting practice focuses on tax-efficient wealth transfer strategy, including maximizing the value of inherited retirement benefits, and trust and estate tax matters. Mike is the author of several books and has written numerous articles published in Leimberg Information Services, Inc., Trusts & Estates,, Ed Slott’s IRA Newsletter and elsewhere. He serves as chair of the CPE Forum of the Central Coast and formerly served as chair of Trusts & Estates magazine’s Retirement Benefits Committee. Mike has lectured across the U.S. for Jerry A. Kasner Estate Planning Symposium, Southern California Tax & Estate Planning Forum, Hawaii Tax Institute, AICPA Advanced Estate Planning Conference, AICPA Conference on Tax Strategies for the High-Income Individual, UCLA-CEB Estate Planning Institute, New York University Institute on Federal Taxation, and others. He has been quoted in Natalie Choate’s Life and Death Planning for Retirement Benefits, Keith Schiller’s Estate Planning At The Movies® — Art of the Estate Tax Return, New York Times, Forbes Magazine, and The Wall Street Journal.