Coinbase exchange is expanding its services to target Australia’s self-managed pension sector, worth $600 billion. The US crypto exchange is working on a tailored service to meet the demand for crypto products in this sector. The company’s Asia-Pacific Managing Director, John O’Loghlen, confirmed the development of this service, aimed at helping self-managed super funds trade and invest in crypto assets effectively.
According to the latest data from the Australian Taxation Office, self-managed pension portfolios comprise a quarter of the country’s $2.5 trillion pension system. Out of this, around AU$1 billion is allocated to crypto assets, a decrease from the 2021 peak of AU$1.5 billion. This decline could be due to institutional money managers in Australia being cautious about the crypto sector due to its past scandals and high volatility. However, the recent talk of launching crypto exchange-traded funds (ETFs) in Australia and the rise in Bitcoin prices have led to an increase in crypto investments in self-managed retirement funds.
Despite the potential benefits of investing in cryptocurrencies, financial experts like Michael Houlihan advise caution. Houlihan, who heads a private wealth management firm, warns against having a significant portion of a portfolio in high-risk assets like cryptocurrencies. He notes that investors interested in cryptocurrencies are usually in their 40s with low account balances. In the past, thousands of Australians who used self-managed pension funds to invest in cryptocurrencies have faced significant losses, highlighting the risks associated with these investments.
The freewheeling nature of Australia’s DIY pension sector has raised concerns about investor protection. Unlike professionally managed funds overseen by prudential regulators, self-managed pension funds have more autonomy in their investment choices. In the UK, self-managed pension funds are prohibited from directly investing in Bitcoin and other cryptocurrencies, demonstrating a more cautious approach towards these assets. Despite the risks involved in crypto investments, the growing interest in digital assets among investors may lead to further developments in the regulatory framework governing self-managed pension funds.
Overall, the expansion of Coinbase’s services to cater to Australia’s self-managed pension sector reflects the increasing demand for crypto products in the country. While there are opportunities for growth in this sector, investors and financial experts emphasize the importance of exercising caution and diversifying investments to mitigate risks. As the regulatory landscape evolves to address the challenges of investing in cryptocurrencies through self-managed pension funds, stakeholders will need to strike a balance between innovation and investor protection to ensure the long-term sustainability of retirement savings.
