Can you hold digital assets in your TFSA?
Canadians are captivated by the potential of cryptocurrencies such as Bitcoin or Ether. While there are benefits to adding cryptocurrencies to your portfolio, investors should be thinking of the potential tax implications of high-risk and high-growth assets. Holding your crypto currencies in a Tax-Free Savings Account (TFSA) is a great way to capture tax-free growth.
Paying tax on cryptocurrencies
If you want to hold cryptocurrencies inside of your TFSA you currently can’t hold them directly, but you can get exposure through a mutual fund or ETF that holds crypto. There are many advantages to taking this route. For starters, holding crypto assets through a mutual fund or ETF lets you own these investments inside a TFSA which provides the benefit of tax-free growth.
The pros and cons of investing in crypto through a TFSA
First, mutual funds units and ETF shares are easy to buy and sell in a TFSA, because there are no taxes on withdrawals, which means you’ll never trigger capital gains, as you would when selling crypto in a non-registered account. The only potential drawback for some digital asset enthusiasts might be that ETFs can only be traded during stock market hours, and mutual fund units only get sold at the end of a trading day. When held directly, cryptocurrencies and other digital assets can be traded 24/7, without a trusted custodian.
Leaving the complexity of digital asset trades to mutual fund and ETF portfolio managers gives you an easier way to access a part of the market that many still find intimidating. According to the Ontario Securities Commission’s Crypto Assets Survey 20231, more than one in five Canadians don’t know where or how to buy crypto assets safely. Mutual funds and ETFs make these assets far more accessible since you don’t have to worry about finding your way around a crypto exchange or securing your digital funds.
Fidelity’s digital asset lineup
A growing number of digital asset mutual funds and ETFs are available to investors today.
In recent years, Fidelity has launched its own digital currency fund, including Fidelity Advantage Bitcoin ETF Fund® and Fidelity Advantage Ether ETF Fund™. Click the links to learn more!
These funds offer flexibility, diversification, and tax efficiency, helping investors engage with the digital universe and potentially generate higher portfolio returns.
Ultimately, deciding whether to invest in cryptocurrencies comes down to your risk tolerance and financial goals. Investors who are optimistic about emerging trends should consider the benefits of holding them in an account, like the TFSA, that allows tax-free growth.
