Recent developments in Australia are bringing closer the reality of investing retirement accounts in Bitcoin and Ethereum. The changes will enable 16 million Australians with Superannuation accounts exposure to this volatile asset class. Let's dive into how this is possible and the big question, should you do it?
What has Changed?
Recently the Australian Securities and Investment Commission (ASIC) updated guidance for creating an ETF backed by Bitcoin and Ethereum. This puts Australia slightly ahead of guidance is in the US, with the SEC yet to green-light a real crypto ETF. It is only a matter of time before one of these ETFs backed by real Bitcoin or Ethereum assets is released on the ASX.
For the average retail investor, investing your post-tax income in shares on the ASX or crypto were relatively as straightforward as each other. Both incurring fees (no Robinhood in Australia) and with tax obligations roughly the same. A new ASX ETF for Bitcoin or Ethereum doesn't change things very much from this perspective, other than opening up this asset class to investors that don't want to stray from their traditional brokerage accounts.
Where an ETF changes things is in retirement accounts. Superannuation accounts are traditionally quite restrictive in your investment options. There are however several Superannuation funds where members can choose which shares and ETFs they would like to invest in. This is like a much more restrictive version of a 401k brokerage account in the US. The fees are quite high but they do gain you access to shares in the ASX300 + ETFs listed on the ASX.
With a Bitcoin or Ethereum ETF present, Superannuation funds could elect to allow their members to invest using their member-directed accounts. This will likely take some time as the ETF would need to gain some considerable assets under management and a good track record before they are added.
Using an SMSF
Investing in Superannuation in crypto isn't new, people have been doing it for several years now through Self-Managed Super Funds (SMSF). The biggest downside to this approach is the significant overhead fixed costs, often $1500+ per year and a lot of time and effort (more on what's involved here). Creating an ETF that is accessible by traditional Superannuation funds opens this investment possibility up to the masses of people without enough time or money to consider using an SMSF.
Should You Invest Your Super in Bitcoin or Ethereum?
DISCLAIMER: I am not a qualified financial advisor, you should consider seeking independent legal, financial, taxation or other advice to check how the information within this blog post relates to your unique circumstances.
As with all investment decisions, the decision to invest your Superannuation in Bitcoin or Ethereum probably comes down to your time horizon (how long until you retire) and your personal risk tolerance.
If you are young and have a high risk tolerance (i.e. you can withstand losing 80% on your Superannuation), then maybe it's an asset class worth looking into investing a large portion of your Super balance in.
If you are 5 years away from retirement, then it's a no-brainer that this is not for you. You would want steady assets to maintain your super balance, such as government bonds or term deposits.
For everyone in the middle, it's pretty traditional investment advice that if this is an asset class you would like some exposure to, you should dedicate a small portion of your portfolio (<10%) to it. A portion which you are fully willing to lose.
