AnchorZero’s Roth IRA Shields Pre-Listing Tokens from Capital Gains Taxes

A crypto-focused Roth IRA provider is targeting crypto project founders, employees, and early investors with a strategy to make the most of their pre-launch and pre-listing tokens.

On Jan. 14, AnchorZero launched a crypto Roth IRA that can accept token warrants and token generation event (TGE) tokens in order to protect against capital gains taxes. It also handles on-chain operations like staking and governance.

A Roth IRA is a special type of individual retirement account that offers tax-free growth and tax-free withdrawals in retirement, provided certain conditions are met. Unlike traditional IRAs, Roth IRAs are funded with after-tax dollars, meaning taxes are paid on the money before it’s contributed to the account. Standard Roth IRAs don’t accept cryptocurrency, but some specialized ones do. However, they all require exchange-listed tokens, AnchorZero said.

The key to AnchorZero’s strategy is getting tokens into a Roth IRA before they are listed on exchanges and start to appreciate, when their market capitalization is very low. That makes it ideal for project founders and early investors.

“This innovative solution is a game-changer for crypto founders and token holders, offering a tax-advantaged way to manage digital assets,” said Galaxy Ventures, an AnchorZero investor.

For example, a project’s founder or early employees could get token warrants when the project has a market capitalization of $10,000 and put them into an AnchorZero Roth IRA. If their tokens eventually grow to be worth $5 million, they could potentially save $1.85 million in capital gains taxes, while retaining the flexibility to sell the tokens and buy other investments with the capital while it remains in the Roth IRA.

It’s worth noting that individuals can only put $7,000 per year into a Roth IRA, which is why getting tokens in well before they go public is vital.