AnchorZero’s new digital asset Roth IRA supports token warrants, TGE tokens, publicly launched tokens, and other token interests, protecting future appreciation and sales from capital gains taxes.
If you are a founder of a new protocol, getting your newly minted tokens into a Roth IRA can help you take home millions more.
When the token mint occurs, token interests typically have a very low cost-basis. Acquiring the asset in a Roth IRA allows the capital appreciation to be shielded from capital gains taxes that would otherwise be incurred.
To make it concrete, let’s follow Alice, an intrepid crypto founder:
Example: Alice launches a token
Try our Exit Calculator to see the impact of taxes on an exit.
Alice is launching a new token. When the token is first created, but before it’s publicly trading, its market cap has a low value (e.g., $10,000). Alice is able to get a significant percent of the supply in her Roth IRA. After the token launches and is publicly trading, the token appreciates significantly. Alice decides to sell when her token interest is worth $50M.
The Roth IRA now has $50M versus $31.5M if the tokens hadn’t been in the Roth IRA. That’s because Alice would have owed $18.5M in capital gains taxes, but because the tokens were in a Roth IRA, no capital gains taxes were due.
Founders and employees have realized billions of dollars of tax-free investment gains
Prominent tech company founders and employees have saved billions by getting their early-stage startup equity into their Roth IRAs, and then reinvesting the gains, tax-free, in other startups and funds. We’re bringing the strategy to digital assets, allowing investors and teams to get early-stage tokens into their Roth IRAs, so they can continue to reinvest the tax-free gains in other startups, funds, tokens, and more.
Until now, the only way to get a token into a Roth IRA would have been to wait until the token listed on a public exchange. However, by that time, the token value would likely have increased significantly, relative to its mint value. Being able to get the pre-launch token, while the token value is low is key.
AnchorZero is the first and only solution for getting private tokens and token interest into Roth IRAs. For the first time, native on-chain operations are available to American retirement assets: digital asset staking and governance are supported in AnchorZero Roth IRAs. Digital asset custody and operations have been made possible through our partnership with Anchorage Digital Bank, an institutional-grade digital asset custodian, regulated by the OCC.
Gains or appreciation in the value of your tokens can be reinvested in other ventures with additional gains protected from capital gains tax.
Continuing the example above, let’s see the impact of tax-advantaged compounding in a Roth IRA:
Example: Alice reinvests without tax drag
Try our Growth Calculator to see the impact of taxes on reinvestment over time.
Now that Alice has a $50M Roth IRA, she reinvests the proceeds in venture funds and a number of startups, some of which release tokens. On average, the Roth realizes an annual return of 15% for the next 20 years. The Roth ends up with a terminal value of $815M.
Whereas if she hadn’t put the tokens in her Roth, the 15% annual return would be realized at 9.4%, after factoring in capital gains taxes. 20 years of compounding at 9.4% would result in a terminal value of $190M.
Alice’s decision to get the tokens in her IRA resulted in taking home an additional $625M — a 328% additional return.
Experienced and trusted by founders and teams
For two years, AnchorZero has helped startup founders, early teams, and angels get their early-stage equity into Roth IRAs. We’ve worked with first-time founders and founders who have taken companies public; big law startup counsel and boutiques; founders who have never contributed to an IRA and those with wealth management teams. We may not have seen it all yet, but we’ve come close.
Must be done early: Get in touch as soon as possible
The key to the strategy is to get early-stage tokens into the Roth IRA, when the tokens have a low cost-basis. It’s best to start as early as possible. We often work with teams before incorporation and have had to turn away many disappointed founders and teams simply because they came to us too late.
At minimum, the process must be kickstarted before any tokens are minted. We recommend contacting us as soon as you’re thinking about launching a token.
To get started, reach out to speak with us today.