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SMSF crypto assets soar to over $1bn

Super

Cryptocurrency assets held in SMSFs have seen more than a fivefold increase in the past two years, according to recent ATO statistics.

By Miranda Brownlee 10 minute read

The latest ATO statistics for the June 2022 quarter showed there is now $1.37 billion in cyrptocurrency assets held by SMSFs.

This represents more than a fivefold increase from the $241 million invested in crypto assets back in June 2020.

While cryptocurrency assets still only account for a small portion of the overall $837.8 billion in net assets in SMSFs, the asset class has seen significant growth particularly compared with other asset classes.

Overall, total net Australian and overseas assets for SMSFs increased from $813.7 billion at 30 June 2021 up to $837.8 billion at the end of June this year.

Cryptocurrency exchange Digital Surge said SMSFs have been increasingly gravitating to crypto assets in recent years particularly with exchanges developing tools and features that better cater to the SMSF market.

With SMSFs continuing to show great interest in this asset class, the crypto exchange said advisers will need to adapt to the changing landscape and consider adding crypto to their offerings.

SMSF service provider Stake Super has also seen significant interest in the asset class from SMSF investors with the company set to add cyrptocurrency to its investment platform later this year.

Last month, Crypto Tax Calculator chief executive Shane Brunette warned SMSF investors on the importance of undertaking thorough research before investing in cyrptocurrency assets with a number of scams emerging in the crypto space.

“[Investors] need to understand from their own perspective whether [it’s] something worth investing in. Hopefully, that’s part of a diversified outlook where you’ve just got a small amount of funds invested with the hope of taking a view from a technology point of view that [a particular crypto asset] is going to be useful at some point in time and has core fundamental value,” Mr Brunette explained.

“[There’s still] a lot of people making money out of advice which perhaps they shouldn’t be giving in terms of investment strategies, and a lot of this leads back to scams. We see it all the time.”

Mr Brunette noted the recent collapse of Terra in the US that was promoted by some parties as a risk-free investment with a 20 per cent yield.

“The whole thing then just collapsed to zero even though there were a lot of participants,” he cautioned.

Cadena Legal director Harrison Dell said there are a range of important compliance requirements for holding crypto assets in an SMSF including proof of ownership, checking that the trust deed allows it and having an investment strategy that covers cryptocurrency.

In order to be able to prove the ownership and existence of the crypto assets, the account must be in the name of the SMSF, he said, which can be difficult given that some exchanges don’t allow SMSF accounts to be registered.

With decentralised wallets or wallets not on exchanges, Mr Dell said it is critical SMSFs think about how they’re going to keep the security of the private key.

“One common security precaution is to use something called a ledger or a trezor which provides a two-factor authentication. It provides some protection from hackers and can also provide a clear path of ownership,” he explained.

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