Cryptocurrency has become a popular topic of discussion in many households. If you are a long-time crypto enthusiast or your child has expressed interest in digital assets, you might wonder whether it’s possible for minors to own cryptocurrency.
The short answer is yes—minors can own crypto, but they cannot open accounts or make transactions independently. They require the assistance of a parent or guardian to manage investments on their behalf. This article explores how you can open a cryptocurrency account for a child, the benefits of early crypto exposure, and what to consider before getting started.
Can Minors Invest in Cryptocurrency?
There is no legal minimum age to own cryptocurrency. However, most regulated crypto exchanges and brokerage platforms require users to be at least 18 years old to open an account. This means minors cannot directly buy, sell, or trade digital assets.
To invest in crypto, a child must have a parent or guardian involved. Adults can set up special types of accounts, such as custodial accounts, through which they can manage crypto investments for the minor.
Is Cryptocurrency a Good Long-Term Investment for Children?
Diversification is a key principle of sound investing. From that perspective, devoting a small portion of a portfolio to cryptocurrency can be a reasonable long-term strategy. Many financial experts suggest limiting crypto exposure to around 5% of total investments due to its volatility.
Proponents of digital currency often highlight blockchain technology’s potential to shape the future of finance. While past performance isn’t a guarantee of future results, some major cryptocurrencies have delivered significant returns over extended periods.
That said, cryptocurrency remains a high-risk asset class. Before investing, it’s essential to research thoroughly and consider the child’s overall financial goals.
Benefits of Crypto Investments for Kids
Introducing children to cryptocurrency can offer several advantages:
- Financial Literacy: Hands-on experience with investing helps kids learn about markets, risk, and technology.
- Long-Term Growth: With a long investment timeline, crypto assets have the potential to grow substantially.
- Engagement: Gamified apps and interactive platforms can make learning about finance fun and engaging.
By starting early, young investors can develop a deeper understanding of digital assets and their role in a modern portfolio.
How to Open a Crypto Account for a Minor
Adults can open a custodial account, joint account, or other specialized account types that allow minors to hold cryptocurrency. Below is a step-by-step guide to setting up such an account.
Choose a Custodial Account
Custodial accounts are designed to hold assets for minors until they reach the age of majority. These accounts can include stocks, bonds, ETFs, and—increasingly—cryptocurrencies.
Under the Uniform Transfers to Minors Act (UTMA), these accounts can also include alternative assets like real estate and certain digital currencies. It’s important to note that while the adult manages the account, the assets legally belong to the child.
Some platforms allow you to invest in crypto-related securities, such as ETFs that track Bitcoin or other digital assets, without holding the cryptocurrency directly. This can be a simpler and more secure option for beginners.
👉 Explore custodial account options
Evaluate Account Features
When selecting a platform, consider the following factors:
- Fees: Look for low or no account fees, including charges for transactions or monthly maintenance.
- Investment Options: Ensure the account supports the specific cryptocurrencies or crypto-related securities you’re interested in.
- Security: Decide between hot wallets (internet-connected) and cold wallets (offline hardware). Each has trade-offs between convenience and security.
- Exchange Reputation: Use established, regulated platforms. Be cautious of claims about FDIC insurance, as cryptocurrencies are not covered.
Submit an Application
You’ll need to provide identifying information for both yourself and the child, including dates of birth and Social Security numbers. The process is usually straightforward and can often be completed online.
Fund the Account
You can fund the account using traditional currency, such as U.S. dollars. Family members can also contribute funds as gifts. Once the account is funded, you can begin purchasing cryptocurrency or other approved assets.
Frequently Asked Questions
Can a minor legally hold cryptocurrency?
Yes, a minor can own cryptocurrency, but they cannot open or manage an exchange account alone. Ownership is typically facilitated through a custodial or joint account managed by an adult.
What is a crypto custodial account?
A custodial account is a financial account an adult manages for a minor. The assets in the account belong to the child and are transferred to them when they reach legal adulthood. Not all custodial accounts support cryptocurrency, so verify this feature before opening an account.
Does Coinbase offer custodial accounts for minors?
No, Coinbase does not currently offer custodial accounts for minors. Parents interested in using Coinbase would need to purchase crypto in their own account and later transfer it to the child.
Can minors use a crypto wallet?
While there is no law prohibiting minors from owning a crypto wallet, most wallet providers and exchanges require users to be 18 or older. Minors usually access crypto through accounts managed by adults.
Are there alternatives to buying crypto for kids?
Yes. Some apps and platforms allow users to earn small amounts of cryptocurrency through learning activities, games, or completing tasks. This can be a low-risk way for kids to start engaging with digital assets.
What are the tax implications of gifting crypto to a child?
Gifting cryptocurrency to a minor can have tax consequences. It’s advisable to consult a tax professional to understand reporting requirements and potential liabilities.
Conclusion
Opening a cryptocurrency account for a minor is a practical way to introduce them to digital assets and investing. Through custodial accounts and guided management, parents can help children build financial literacy and potentially benefit from long-term growth in the crypto market.
Always prioritize security, choose reputable platforms, and ensure that cryptocurrency investments are part of a diversified and balanced portfolio. With careful planning, crypto can be a valuable component of a child’s financial future.