The Australian Tax Office has recently declared that any kind of self-managed fund that is backed only by crypto is breaking the law. Despite what it may look like, this is not a change or a new approach. No Australian retirement fund can have more than 90% of its value in a single asset class.
As you may know, these self-managed funds do not have any specialized company taking care of them, only the main investor. People are legally obliged to diversify their portfolios in this case, possibly in order to save them from themselves.
Unfortunately, this means that someone who has profited a lot from Bitcoin will have to sell some of it and buy other assets instead of being fined by the government.
According to Australian news site Micky, a total of 18,000 funds received warning letters this week because of this. The amount of them that only held crypto was not disclosed. Any self-managed fund that does not comply with the law can be fined in up to $4,200 AUD, which is not a lot if you got rich investing in Bitcoin by yourself.
Crypto Are Risky Investments
Despite how much you may not like that the government is meddling in your investments, the law was created with “good intentions”. It is more dangerous to invest in a single asset class. Cryptos, for instance, are highly volatile.
If you invested all your retirement money in Bitcoin when it was worth $20,000 USD and got out when it was around $4,000 USD, you would have lost 80% of your money. Cryptos are a great investment, but a diversified portfolio is always great.