Cryptocurrency Risk: High Exposure Asset or Retirement Fund Disaster?

When retirement investors are considering assets for estate or trust transfer, one of the main priorities is the impact of risk. In the past several years, cryptocurrency assets have increased in popularity. Until 2017, Bitcoin and other digital currency assets were also considered as tax-exempt “property” under federal Internal Revenue Service (“IRS”) guidelines. Recent IRS rule reform of tax-exempt treatment of cryptocurrency assets reflects a growing concern about the lack of direct oversight of digital currency within the regulatory environment. Identified as the most significant risks of cryptocurrency asset transfer within policy formation at this time: pricing transparency, price manipulation, as well as the potential for fraud scams, custody disputes, and liquidity issues.


How CFTC & SEC Oversight Will Help

Regulatory oversight of price transparency and control over price fixing, and price manipulation is uneven across national and international markets. For this reason, digital currency cannot be traded on regulated financial markets. Derivatives like Bitcoin futures trading on the CBOE or CME offer investors the least risky investment for profit.


Investment scams designed to artificially raise prices of a targeted cryptocurrency to gain short-term. Scammers then “dump” a cryptocurrency trade on the market once divested of its value. The potential for counter-party dispute and liquidity issues in the future will likely advance further attention to regulation of digital asset transfer, including estate and trust transfer of cryptocurrency retirement assets.


The U.S. federal Commodity Futures Trading Commission (“CFTC”) and Securities and Exchange Commission (“SEC”) establishes rules for exchange trading of cryptocurrency backed securities. CFTC and SEC surveillance. CFTC and SEC oversight will improve pricing reliability on the spot markets exchanges going forward.

What to Expect in the Near Future

Although central bank monetary policy remains largely separate from high risk cryptocurrency, the flipside of volatility is high exposure and the potential for big payoffs. Moreover, the cryptocurrency regulatory environment in its present state allows investors to profit from lucrative spreads. In the near future, investors can expect the rise in global investment in cryptocurrency, combined with the growing attention to regulatory requirements both in the U.S. and abroad to culminate in greater uniformity, of law.


Will there be consolidation of exchanges and better security as a result? Retirement investors may not be in the position to wait. Ask an attorney about the potential benefits and risks of cryptocurrency investment for the future.


Ask an Estate Law Attorney

Retirement investors can learn if cryptocurrency is recommended asset for estate or trust transfer by speaking to a licensed attorney experienced in matters of estate law and probate litigation. Find out if convertible cryptocurrency assets are suitable retirement investment for transfer to an estate or trust. Ettinger Law Firm is a licensed New York attorney practice specializing in estate planning and probate litigation. Contact Ettinger Law Firm to schedule a consultation about your estate planning strategy.   

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