A Los Angeles financial services firm this week launched what’s billed as the first-ever sales of Ether in IRAs, which was immediately hailed as a “game-changer.”
Writing on Investopedia, Prableen Bajpai, director of India think tank FinFix, noted that BitcoinIRA’s Ether launch was a milestone in the development of virtual currency. The firm had started sales of bitcoins in retirement accounts last year. Her thesis was that Ether has reached a tipping point due to its technical advances and widening popularity.
“The unique properties and the present progress around virtual currencies are solidifying their future,” Bajpai wrote. “While challenges remain, calculated risks can result in sweet rewards for investors in the long term.”
So what makes Ether a game-changer in the IRA industry? Chris Kline, chief operating officer at BitcoinIRA, sums it up in an interview with ETHNews:
“Two words: Mainstream adoption. That’s been our driving factor since we started BitcoinIRA. Cryptocurrency as an industry is here to stay and is fortifying its place in the monetary system. Our achievements in acclimating regulators and IRA custodians paves the way for further mainstream adoption ahead.”
The firm, in the Sherman Oaks neighborhood of Los Angeles, has evolved from its 2012 roots in self-directed IRAs. There are now about 15 employees. Since it began selling bitcoins in June, investors have purchased about $10 million worth of the virtual currency. The average investment in cryptocurrency has been $45,000. The company services customers who have accounts ranging from less than $10,000 to those who have rolled over $400,000 at once.
Kline said that his clients have been asking for Ether; hence the decision to add the product among its offerings that hedge against risks to other assets.
“We are thrilled with the results,” he said. “Our accounts are not just about virtual currency. This account type allows clients to sit in fiat USD, bitcoin, Ethereum, gold, silver, other precious metals. As well, real estate and crowdfunding options are currently in development. The buyer wants alternatives from dollar-based assets as there are real threats to currency as we know it today ahead.”
As for changing the game, if other financial services firms follow BitcoinIRA’s lead, that could indeed trigger the mainstream adoption Kline predicts. Motley Fool estimates that 33 percent of Americans hold IRAs, and that the average preretirement IRA is funded with about $100,000. In simplest terms, that translates into an enormous market.
The company’s chief strategist is Edmund C. Moy, a former director of the US Mint who was an early adopter of both bitcoin and Ether, and BitcoinIRA’s first customer for both bitcoin and Ether.
“The promise of digital currency is a new financial transaction system: cheaper, more efficient and secure transactions,” Moy says on the company’s website. “No currency wars, exchange rates and arbitrage. There could be less friction and more transparency for every transaction.”
In heralding the development in her Investopedia article, Bajpai cited Ether’s rise as a force on the cryptocurrency scene, evidenced by Microsoft’s partnership with ConsenSys for Ethereum “blockchain as a service” on the tech giant’s new Azure platform, and the establishment of an Ethereum alliance that includes Microsoft, American financial institutions such as JPMorgan Chase and Bank of New York Mellon, and international corporations such as ING, British Petroleum, and Credit Suisse.
Kline also noted the broader challenges of the investment landscape.
“The demand is coming directly from buyers seeking alternatives and yields,” he said. “With the abuse of T-bill swaps and qualitative easing from central banks, coupled with stock indexes at record highs, investors are seeking yield. And crypto, no doubt, has shown its potential in that regard.”
His buyers come with some prior knowledge of virtual currency.
“Like with bitcoin, our early adopters are certainly crypto-focused either in their career or their overall investment strategy,” he said. “Most already own bitcoin/Ether outside of their retirement accounts. They want to use the specific tax-deferred or tax-free settings with assets they feel have substantial upside potential. “
Kline predicts that could change, soon, however:
“Ahead, with proper education, more and more of the concerned American investor will also jump on board. Even with bitcoin we have not seen an obvious buyer archetype. From millennials to those born before the Great Depression, crypto doesn’t require a membership card.”