Conquering the Unknown: Overcoming Fear
Updated: Jan 11, 2021
The unknown created fear, and fear creates reasons for why people do not try things.
I was recently challenged with an idea to be one of the first custodians to hold custody of digital currency on behalf of our IRA account owners. Because “no” is not in my vocabulary, I started the research as defined in my previous blog that took me on journey I could have not dreamt up.
The journey started backwards. It started with a partnership opportunity coming to me requesting the possibility. Because of the aggressive, yet professional approach taken by this company I was intrigued. Because I knew the potential, I immediately started to go through my natural steps that I discussed in my previous blog, although with hesitation and the media surrounding digital currency was at an all-time high.
Depending upon what you read or heard it was the best and worst investment. Keeping true to my role as a custody it is not my role to determine the viability of an investment. My role is no different than any other alternative investment held by our clients. Does the IRS recognize digital currency as a commodity? Yes. Is an IRA able to hold this type of investment? Yes. So, let the research begin.
“Trust me when I say there are no guarantees with any investment”
The competitive research did not take long as there was only one custodian in the country that was holding custody of this type of investment. That of course got me wondering why. The only conclusion I could come to is that the unknown created fear and fear creates reason for why people do not try things. I do not have a fear of digital currency because like with all investments there are risks. Although some would say that digital currency carries more risk, I would challenge that statement as I have lost money in government bonds when a city went bankrupt. Trust me when I say there are no guarantees with any investment, including government guaranteed investments. Last time I checked our government is how many trillions in debt, and yet they are making guarantees? What may have been an obstacle for others, was not for me.
My competitive research led me to a conference and many conversations with members of the one custodian that was holding custody of digital currency. Of course, they had no idea I was a custodian because you do not disclose that information when you are doing competitive research. I realized quickly that they were being puppeteered by another company. They could not answer basic questions and deferred to another company. It was clear to me that they were in over their heads and being led by others. This does not bode well for a company that is not capable and clients will make sure that everyone knows a company’s strengths and weaknesses. So, I read every complaint and acknowledgement as to the systems in place for the purchase and selling of digital currency with this custodian. It was clear from the comments what was working and what was not working well. It also gave me the intel needed to make sure we did not repeat this pattern. Shortly after this research, the puppeteer was identified when the two companies signed an exclusive agreement and then locked their customers into it and followed that up with an acquisition, it was clear that my opinion of the situation was accurate. This is monopoly 101 at its best. So, the question was am I willing to break up this monopoly by providing other options and go against the giant? Duh, of course this does not scare me. After checking this off my list I was on to the next topic.
How do I create a bulletproof system of becoming a custodian of digital currency? You hit the books and you do your research to determine the best way. The options are limitless if you have the guts to put client’s retirement in the hands of start-ups. I spoke with no less than 10 different experts in the field to determine my next move as I do not have the guts when it come to my responsibility to protect the custody of this type of asset. It is digital currency, so you would assume that it is held in a digital format. Guess again. The safest way to hold your digital currency is cold storage. Cold storage is a device that looks like a USB drive with multiple layers of encryption. This was my first introduction of how digital currency is misunderstood. Knowing that is the most protective format to hold custody of digital currency it was the only option.
One of things I learned about digital currency when going to industry specific conferences is that you never discuss your internal/external processes, so this is where this conversation is going to stop on this topic. Sometimes being the best means you are not a trailblazer and that you succumb to the experts in the field, which is why Preferred Trust Company follows the Crypto Currency Security Standards established by the industry leading experts.
Preferred Trust Company has now been offering the custody of digital currency for our IRA client for three years. We were the second custodian in the industry to offer this and we will continue to do so without hesitation.