A Conversation with…BitcoinIRA COO Chris Kline

FinTech, Innovation, Investing, Regulation | May 18, 2017 By:

Interest in cryptocurrency has never been higher, as more businesses and regulators pile on the bandwagon and start experimenting.

The financial world has taken notice, developing several products that allow investors to capitalize on the trend. One of them is BitcoinIRA, which just launched an ethereum IRA to join the bitcoin version that debuted in June, 2016.  The individual retirement accounts are self-directed and can be held in traditional IRAs, Roth IRAs, SEP IRAs, and 401Ks. The regulatory structure that is followed for regular IRAs also holds for both cryptocurrency IRAs, and the Brave New Coin price data is used as the reference peg. Liquidity is held by Genesis Global Trading, and BitGo handles the digital wallet.

Bitcoin IRA COO Chris Kline talked with Block Tribune about the financial instruments.

BLOCK TRIBUNE:  When did the concept of making an option for cryptocurrency IRA’s occur?

CHRIS KLINE:  In summer 2015, our team was busy within the self-directed IRA space providing options with precious metals, real estate, LLC’s and more.  Because of our reputation as an innovative and bold company, cryptocurrency was put on the table as a challenge to implement into retirement accounts. At first, it seemed impossible.  Such a fresh product with not the best mainstream reputation was certainly going to be cumbersome with custodians and regulators.  Once we started testing the product and understanding its capability as a disruptive technology, we knew we were onto something.  Today we hope to continue as a catalyst of mainstream education and adoption for cryptocurrency.  This is a wonderful industry to work within and we couldn’t be happier with our client response and satisfaction.

BLOCK TRIBUNE:  What are your upfront fees and maintenance?

CHRIS KLINE:  There is a one-time up-front fee for accounts.  This fee is round-turn, meaning no annual management percentage or liquidation percentage. The amount depends on the amount you were going to invest into bitcoin. 15% on accounts of $15,000–$100,000; 13% on $100,000–$200,000 accounts; and 11% on those $200,000 and above.

Ongoing, starting the 2nd year, there is a $100/year custodian fee with Kingdom Trust. There is no fee to liquidate the account nor any annual management fees from Bitcoin IRA.

BLOCK TRIBUNE:  How does the government regulate this?  

CHRIS KLINE:  IRA Custodians go through an extensive process to have the IRS bestow them as a trust to bear assets in a retirement setting.  Those custodians have their credentials and protocols for approving the assets they bear.  Several factors come into play when making this decision, notably the indicia of ownership, security and convertibility to fiat USD.  By working with our custodian, Kingdom Trust Company, we got our custom process to directly hold cryptocurrency approved and on-boarded.  For each account, they are the custodian holding the assets in a Traditional, Roth, Simple or SEP self-directed IRA.

BLOCK TRIBUNE:  Do they make their determination in the traditional way that assets are measured, by the price spread on date of acquisition versus date of withdrawal?  

CHRIS KLINE:  All other factors of contributions and distributions are the same as standard IRA vehicles you are familiar with, like Fidelity or Edward Jones.  The difference is these self-directed accounts are used to invest in alternative assets such as real estate, peer lending, precious metals, and now, cryptocurrency.

BLOCK TRIBUNE:  How much of your portfolio, percentage-wise, should be kept in cryptocurrency?

CHRIS KLINE:  As neither a tax nor financial advisor, we do not make recommendations of portfolio composition.  To date we’ve had some people do 1-10% of their portfolios in cryptocurrency, and others that have done most of their portfolio in cryptocurrency.  Those decisions are self-directed and really depend on the client’s beliefs in bitcoin and cryptocurrency overall.

BLOCK TRIBUNE: Why ethereum and not bitcoin?

CHRIS KLINE:  At this time, we offer both.  Bitcoin was the first cryptocurrency available starting May 2016.  By listening to our clients and allowing them to help us drive the options forward, Ethereum was an obvious next step.  We are in development now with our partners to offer Litecoin and Ripple later this year.

BLOCK TRIBUNE: How many people have an ethereum IRA with you?  Mostly individuals, or corporate?

CHRIS KLINE:  We announced the Ethereum IRA in late April and started taking new accounts within minutes.  Once an account is established and funded via transfer/rollover, the client can start executing trades for ethereum.  As of this moment, we just completed our 60th ethereum account and have dozens of accounts opening daily.  All individual accounts.

BLOCK TRIBUNE: What are the IRA funds invested in?

CHRIS KLINE:  Unlike the proxy certificates of bitcoin out there and in development, our program is a direct investment in bitcoin and/or ethereum.  The coins are stored in off-exchange cold storage Bitgo wallets with multi-signature security protocols and an additional layer of custom protections for IRA wallets.

BLOCK TRIBUNE:  If you are older than 59 1/2, should you contribute to this?

CHRIS KLINE: Individuals are eligible to contribute to any IRA until 70.5 if they have earned income (which can be many different things).  Our clients are not normally contributing to a new IRA, but rather rolling over/transferring funds from an existing 401k or IRA.