You probably already knew this from friends repeatedly telling you how much they made on Bitcoin, but the total number of global crypto holders passed 100m people earlier this year.
These assets are sitting in Coinbase, Cash App, PayPal and other digital wallets.
One place they aren’t right now:
Kingdom Trust Company — a crypto startup creating custody solutions for digital assets — is working to change that with its platform Choice, a service that provides a retirement account that can hold stocks, gold, ETFs and …digital assets.
Launched in May 2020, the startup now has:
- 125k retirement accounts
- $18B+ of assets under custody across 20k types of assets
Bitcoin became eligible for retirement accounts in 2014
That year, the Internal Revenue Service (IRS)
took a huge cut of your pay check determined that Bitcoin was property (and not currency).
Since then, a hodler of the crypto currency triggers a tax event anytime they trade or sell.
The new classification also made Bitcoin eligible for all the tax-deferment benefits an individual gets from trading within IRA (and Roth IRA) accounts…which Choice enables.
We spoke with Kingdom Trust’s CEO Ryan Radloff to find out more:
In five years, what retirement allocation do you project will go towards crypto?
Right now, the [US] average for [a 401k] retirement account is ~$105K, with a 0% digital asset allocation.
Currently, Choice clients have an average value of ~$215K, with an average digital asset allocation of 67%.
I would expect over the next 2 years, as digital assets become more accessible through people like us and even through traditional banks, the national average allocation begins to trend closer to a similar allocation as gold.
And over the next 5 years it trends closer to our average allocation than it does to gold.
What is the biggest *risk* to your business?
Laziness and complacency.
Retirement is boring!
The incumbents in the space taught us to be complacent and think of tax-efficient accounts as “retirement accounts”: a place to put your money and forget about it.
The net effect of that is that most people have retirement accounts basically stuck in 1 of 3 target-date funds. They don’t even think about the potential of investing without capital gains.
So we’ve all gotten lazy with our hard-earned money.
Our job is to wake people up to the fact that they have a choice. That they can trade and hold things like Bitcoin in their tax-efficient account. They don’t have to be retirement zombies.
Some days people want to hear that more than others.
We’ve had a lot of success already in Bitcoin and digital assets because it’s a generation of investors who are more engaged, and more curious than ever before.
They are looking for a smart and tax-efficient way to hold assets long term. Continuing to be able to engage investors and wake up the zombies fast enough is constantly our biggest threat.
What are you most excited about for Choice?
Our users have already invested their accounts in a way that has resulted in average account values of more than 2x the national average.
That’s hard not to get excited about. The thesis is working: teach people they have a choice and they take care of themselves.
We already have $2B in digital assets right now, so our users are way ahead of others. But there is still so much room to grow both in digital assets and alternatives.
Whether we are talking about introducing the $2T held by digital asset investors to tax-efficient investing or introducing the $35T held by retirement investors to actual choice in their investment options, we get excited to help people use the tools they likely didn’t even know they had.
[We want to help people] do more with — and keep more of — their hard-earned savings.
What is the type of target user you’re going after?
Right now, we’re hyper-focused on educating Bitcoiners and other digital asset users that it’s possible to invest in a tax-efficient way. This tax season was a wake-up call for a lot of people who — whether on Robinhood or Coinbase — were actively trading and made a decent sum of money.
A lot of people didn’t take into account that when actively trading, you have to be mindful of short-term capital gains taxes; and as a result, they racked up an enormous tax bill.
Conventional wisdom around retirement accounts is that they are “a place to put your safe money – make your annual contributions, throw it in some ETFs, and forget about it.“
But the term ‘retirement account’ is just branding and it’s terrible branding at that. Fundamentally, they are tax-efficient accounts that allow you to trade without the IRS considering your gains as realized.
When your gains aren’t realized, you don’t have to pay capital gains taxes, so you can trade as much as you want without having to worry about them. And if you just want to hodl, there are ways (Roth IRA) to do it so you never have to pay a single penny in taxes on your gains.
But, we’re not just for Bitcoin and digital asset investors.
There is $35T held in US retirement accounts, and for a lot of Americans, it is their primary investment account. We have an incredible opportunity to use retirement accounts to help democratize access to all sorts of investment choices.
What should people know about long term investment in digital assets
They should do their research and make their own choices. The digital assets markets are still relatively young and in the earlier stages of your typical adoption curve, so risks and volatility are still very high.
But if they decide to invest for the long term, then they should make sure to consider things like tax efficiency and inheritance planning to maximize the amount they have to grow and reduce hassle for future generations.
What’s the team’s background?
The team is a combination of experts in alternative custody and digital assets.
This is a result of combining Choice and Kingdom Trust in 2020.
- On the Choice side, you have a team who — prior to Choice — co-founded CoinShares (Europe’s largest digital asset manager), which is currently responsible for managing around $5B in digital assets on behalf of a global investor base.
- On the Kingdom Trust side, you have a team of alternative custody experts who have spent the last decade building a business helping investors hold everything from physical gold to fire trucks in their tax-efficient accounts.
It’s this blend of old and new expertise that allows us to continue to safely innovate in the space. It also allows us to break down the tactics that only few knew about before, into products that can equip everyone with the choices they deserve.
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