Recent crypto purveyors have been touting tax advantages of holding actual cryptocurrency in IRAs. It should come as no surprise that crypto “investing” in Retirement Accounts is fraught with rules and regulations. And, of course, costs.

Setting aside (for now) my opinions regarding crypto as an investment, here are a few things potential crypto investors should understand before making a purchase in an IRA.

• Only earned cash can be used to fund an IRA (no crypto)
• Owning crypto in an IRA requires a cash contribution, followed by a purchase made within the IRA
• IRS prohibits “collectibles” to be purchased in most IRAs, as well as life insurance, real estate, and certain other non-traditional assets
• Crypto falls into the questionable area between allowed vs. unallowed IRA assets
• Because of these rules, specialized custodians have sprung up to accommodate people who want to own alternative investments within their IRAs
• Due to the specialized nature of the custodians, custodial fees and expenses for these IRAs tend to be considerably higher than those for their mainstream counterparts
• Expect more regulations to be implemented soon, with unpredictable results (exposure to crypto is already available in some ETFs)

The IRS has long realized the universal benefits of Americans directing their own retirement assets. This is demonstrated through Congressional legislation authorizing IRAs, 401(k)s, and other tax-advantaged Retirement Accounts. Most of these accounts offer some degree of owner-investing direction, but Congress has strictly limited some risky investments from being held in those accounts.

In exchange for Americans deferring taxation on the income they contribute to Qualified Retirement Accounts, IRS is making sure that the account balances will not be squandered through complex, risky, and misunderstood investments. For that, they should be applauded.

The nascent crypto market can be accessed today, but the reason for excluding these assets from the mainstream of available Retirement Account assets should give pause to every crypto investor.