For Matthew Roed, Social Security is looking a lot less promising than the money he’s stashed away in his BitcoinIRA.
Roed is a registered nurse living in Golden Valley, Minnesota, and he says he’s spent 16,000 hours researching all things bitcoin. His conclusion? Investing in the cryptocurrency is the key to retiring well, and the best way to do it is through a tax-free, self-directed Individual Retirement Account, or IRA.
“Since bitcoin is legally classified as property by the U.S. government and my crypto is inside of an IRA, I knew that I would greatly reduce my taxable expenses due to exponential growth,” said Roed.
At today’s prices, the gamble has so far paid off.
The MBA grad, father, and husband initially invested $30,000 into his BitcoinIRA. Right now, he says that his retirement portfolio is up to $250,000,
While it’s down from its peak of $500,000, Roed still feels vindicated in his conviction that bitcoin is the future.
“No one wanted to listen to me at that time, including my own family,” he said. “I became reclusive and used my frustration to push more and more into getting involved in that market.”
BitcoinIRA launched in May of 2016, offering investors the tax-advantage of an IRA, plus the return of a high-risk, high-reward alternative asset class. It’s similar in nature to other IRAs, except that instead of being funded by gold, cash, and bonds, it’s backed by bitcoin.
The company has more than 100,000 individual account holders, including clients as young as 18. But chief operating officer Chris Kline tells CNBC that 75% of account holders are 45 and over. “It’s not a young kids’ game anymore,” he said.
BitcoinIRA isn’t just dealing in bitcoin either. It now includes a long list of cryptocurrencies, including ethereum and litecoin.
Duke University’s Campbell Harvey thinks diversification is the right call.
“To have a portfolio that has exposure…to a single crypto like bitcoin, that doesn’t make any sense, because while bitcoin is the most important one right now, its share of the overall capitalization of cryptos has decreased through time. There are so many other tokens out there,” Harvey said.
When CNBC first profiled BitcoinIRA in 2017, it served $6 million in transactions for 700 account holders. This month, it passed $1.5 billion in all-time transactions.
There were also far fewer players in the crypto retirement space. The market is now flooded with options.
A recent survey of financial advisors shows a significant shift to cryptocurrencies. 14% of the more than 500 financial advisors included in the report said they now use or recommend cryptocurrency to clients, versus fewer than 1% in 2019 and 2020.
IRA custodian Kingdom Trust offers users the option to diversify in 20 different cryptocurrencies. CEO Ryan Radloff tells CNBC that $2 billion of the $17 billion that it holds for clients is now in cryptocurrency. That’s up from $350 million a year ago.
“The amount of people interested in including bitcoin in their retirement savings…is increasing exponentially,” said Radloff. “People don’t want zombie retirement accounts that only allow you to invest in three target-date funds. They want to have more choice in what they do with their hard-earned money, and they want access to hard-assets that will increase in value over a long time horizon.”
IRA vs. Roth IRA vs. 401(k)
Crypto-backed retirement portfolios may rapidly be gaining in popularity, but there are still some major limitations.
For one, while there are multiple ways to invest your savings for retirement – be it an employer-sponsored 401(k) or a Roth IRA – very few of these vehicles actually allow for an alternative asset like gold or crypto.
That’s why the primary retirement vehicle for holding crypto is self-directed IRAs, explains Shehan Chandrasekera, a CPA and head of tax strategy at crypto tax software company CoinTracker.io.
As the name suggests, it’s an account you open with a custodian, you make all investment decisions, and your income is tax sheltered until your retirement. Kingdom Trust and BitcoinIRA both follow this model.
“So far as retirement accounts go, right now, with bitcoin, it’s IRAs, IRAs, IRAs,” explained Onramp Invest chief executive Tyrone Ross. Onramp sells software that helps financial advisers keep track of client cryptocurrency investments.
“Because it’s considered property by the IRS…that is why you’re seeing the self-directed IRA space explode,” continued Ross. “There’s a lot of regulation to get through before you get it into the 401(k) space.”
There are exceptions. A small 401(k) provider called ForUsAll announced last month that it is now allowing participants to allocate up to 5% of their retirement funds into 50 different crypto assets including bitcoin, which will be custodied and managed by Coinbase.
Companies like BitWage and Digital Asset Investment Management are also trying to fold crypto into traditional retirement plans offered by employers.
But Chandrasekera says that “generally speaking, 99% of 401(k) plans don’t offer bitcoin services,” so there is still a ways to go until bitcoin hits mainstream retirement platforms.
Fidelity, for example, tells clients that retail brokerage customers cannot buy or sell any cryptocurrencies at Fidelity, though they can, theoretically, get exposure to the bitcoin trade through crypto-associated companies trading on the public markets. Same goes for Charles Schwab.
Volatility risk versus tax savings
Roed spoke to CNBC after wrapping a 14-hour night shift. Those post-work hours are when the rehabilitation staff nurse invests the most time into researching ways to invest in cryptocurrencies.
Part of why he settled on BitcoinIRA has to do with the company’s staking program. Roed lends third parties his bitcoin and in return, he earns an annual percentage rate, or APR, for the risk. “It’s something like 2% per year,” he said.
This helps to offset the $240 annual account fee, plus the average transaction fees of 1% to sell and 5.5% to buy.
Kline says that clients can earn up to 6% annual percentage yield on cash and cryptocurrency, which helps balance out the fees.
Another major consideration? The volatility of bitcoin.
The world’s most popular cryptocurrency is trading at about half of what it was worth in April.
“We don’t see that volatility in, for example, the stock market,” explained Harvey.
“It’s naive to think that bitcoin is just going to keep on going up. There is going to be some limit, and people need to deeply consider that,” he said.
Beyond the volatility risks, the Securities and Exchange Commission has also warned of the risk of fraud when participating in self-directed IRAs which deal in cryptos.
But Kline remains optimistic. He ran CNBC through a case study of one client who purchased about $1.5 million worth of bitcoin in April of 2020, when the token was trading at around $7,335. At today’s value, his investment is worth well over $6 million.
But ultimately, Kline says it’s the tax break that makes BitcoinIRA a slam dunk for those looking to deal in cryptos.
If a taxpayer at an average income level were to sell his bitcoin today, he would pay no tax for the crypto held in his BitcoinIRA. If it were in a Coinbase account, this same person would face a 22% short-term capital gains tax or 15% for a long-term holding.
“Pretty clear quantitative reasoning to put an asset like bitcoin in an IRA setting,” said Kline.
CORRECTION: This article has been updated to show that registered nurse Matthew Roed spent 16,000 hours researching cryptocurrencies, not 160,000 hours. Also, it clarifies that 75% of BitcoinIRA account holders are age 45 and over.
TikTok halts e-commerce service in Indonesia following ban
A merchant sells crystal ornaments via a live TikTok broadcast.
CFOTO | Future Publishing | Getty Images
TikTok Indonesia said it will end transactions on its e-commerce marketplace by Thursday, in order to comply with new local regulations.
The announcement comes after the Indonesian ministry of trade last week set a one-week deadline for TikTok to become a standalone app, without any e-commerce feature, or risk being shut down.
“Our priority is to remain compliant with local laws and regulations,” said TikTok in a statement on Tuesday.
“As such, we will no longer facilitate e-commerce transactions in TikTok Shop Indonesia by 17:00 GMT+7, October 4, and will continue to cooperate with the relevant authorities on the path forward,” it said.
The move comes after President Joko Widodo recently called for social media regulations. He said the influx of such platforms has contributed to a sales decline for domestic businesses by flooding the market with foreign imports.
The new regulation could deal a major blow to TikTok’s Southeast Asian ambitions. CEO Shou Zi Chew previously said that the app will invest billions of dollars into the region as it looks to diversify its business globally as U.S. pressure escalates.
Indonesia is TikTok’s largest Southeast Asian market and second-largest market globally with 125 million users after the U.S., according to the company.
Sachin Mittal, head of telecom, media and technology research at DBS Bank, previously said that TikTok “operating as a standalone app may still be challenging.”
He explained logging into a separate app might lead to a sharp drop-out rate as most purchases on TikTok are impulse buys.
Ripple obtains full license to operate in Singapore as it expands in Asia-Pacific
Brad Garlinghouse, chief executive officer of Ripple Labs Inc., speaks during the Token2049 conference in Singapore, on Wednesday, Sept. 13, 2023.
Joseph Nair | Bloomberg | Getty Images
Cryptocurrency company Ripple said on Wednesday that it has obtained a major payments institution license in Singapore, a strategic step toward growing its presence in the Asia-Pacific region.
The new development comes less than four months after the Monetary Authority of Singapore granted an initial in-principle approval in June. With the full license, Ripple will continue to provide regulated crypto payment services in Singapore.
“Over 90% of Ripple’s business is outside of the U.S., and Singapore – and to a larger degree Asia Pacific – is one of its fastest growing regions,” the company said.
Ripple said it will continue to prioritize the region for adoption of its crypto payment services.
Monica Long, president of Ripple, told CNBC in an interview last month that the Singapore office’s “headcount has more than doubled in the past year because our business within the Asia-Pacific region has really exploded.”
Singapore has led crypto regulation in the region. The country’s Payment Services Act — which regulates payment services and the provision of crypto services to the public — has been in effect since January 2020.
The city-state has also stepped up scrutiny on crypto firms. It ordered crypto service providers to safekeep customer assets under a statutory trust before the end of 2023. It also restricts such firms from facilitating lending or staking of their retail customers’ assets.
“Since establishing Singapore as our Asia Pacific headquarters in 2017, the country has been pivotal to Ripple’s global business. We have hired exceptional talent and local leadership … and plan to continue growing our presence in a progressive jurisdiction like Singapore,” Brad Garlinghouse, CEO of Ripple, said in a statement.
“Under MAS’ leadership, Singapore has developed into one of the leading fintech and digital asset hubs striking the balance between innovation, consumer protection and responsible growth,” said Garlinghouse.
The comment stand in contrast to Ripple’s situation in the U.S., where it and Coinbase are embroiled in lawsuits with the Securities and Exchange Commission. The SEC charged Ripple and its founders in 2020, alleging they illegally sold its native cryptocurrency XRP without first registering it with the SEC. But in July, a landmark ruling determined the token was not, in itself, necessarily a security.
Coinbase, Ripple and other crypto firms have slammed the U.S. for a lack of clarity around crypto rules and threatened to leave the country in response to the SEC’s crackdown.
Coinbase announced on Monday that it has obtained a major payment institution license in Singapore, after obtaining in-principle approval about a year ago. Ripple and Coinbase join more than a dozen firms that are licensed to offer crypto services in Singapore.
Intel plans to IPO programmable chip unit within three years; stock rises after hours
Pat Gelsinger, CEO, of Intel Corporation, testifies during the Senate Commerce, Science, and Transportation hearing on semiconductors titled Developing Next Generation Technology for Innovation, in Russell Senate Office Building on Wednesday, March 23, 2022.
Tom Williams | CQ-Roll Call, Inc. | Getty Images
Intel said it will treat its programmable chip unit as as a standalone business, with an aim to spin it out through an IPO in the next two to three years.
The chipmaker’s stock price rose 2.3% in extended trading after the announcement on Tuesday.
Intel’s Programmable Solutions Group will have its own balance sheet as it heads toward independence. The company will continue to support the business and retain a majority stake, and could also seek private investment.
Sandra Rivera, who leads Intel’s broader Data Center and AI group, will become PSG CEO. Intel will manufacture the group’s chips.
The move follows Intel’s spinoff last year of Mobileye, its self-driving subsidiary, and continues a strategy under CEO Patrick Gelsinger to control costs and focus on the foundry business and core processors in an effort to catch Taiwan Semiconductor Manufacturing Co. in manufacturing by 2026. Intel acquired the FPGA business when it bought Altera for $16.7 billion in 2015.
“Our intention to establish PSG as a standalone business and pursue an IPO is another example of how we are consistently unlocking more value for our stakeholders,” Gelsinger said in a statement.
The move also highlights the strong demand in the semiconductor industry for field programmable gate arrays, or FPGAs. Lattice Semiconductor, a maker of FPGAs, has seen its stock rise about 30% so far in 2023, and reported 18% growth in sales in the most recent quarter. AMD, Intel’s chief rival, bought FPGA maker Xilinx for $35 billion in 2022.
FPGAs are simpler than the powerful processors at the heart of servers and PCs but are often more flexible, respond faster and can be more power-efficient. They’re “programmed” after they’re shipped for specific uses in data centers, telecommunications, video encoding, aviation and other industries. FPGAs can also be used to run some artificial intelligence algorithms.
Intel’s FPGAs are sold under the Agilex brand. Intel doesn’t break out PSG sales yet, but said in July that the unit had three record quarters in a row, offsetting a slump in server chip sales. PSG has been part of Intel’s Data Center and AI group, which generated $4 billion in sales in the second quarter.
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