Coinbase, the largest US crypto exchange, is planning to expand its services in Australia to target the country’s $600 billion self-managed pension sector. The exchange is developing a tailored service to cater to the demand for crypto products among self-managed super funds, with the goal of providing clients with a seamless trading experience. Self-managed pension portfolios make up a significant portion of Australia’s $2.5 trillion pension system, with about $1 billion designated for crypto assets. However, this amount is down from a peak of $1.5 billion in 2021, possibly due to the apprehension of institutional money managers towards the crypto sector.
The decrease in crypto investments within self-managed pension funds could be attributed to the past scandals and high volatility associated with the crypto market. Despite this, recent developments such as talks of launching crypto exchange-traded funds (ETFs) in Australia and the increase in Bitcoin prices have led to a resurgence in crypto holdings within these retirement funds. However, there are concerns about the risks associated with investing a significant portion of a portfolio in highly volatile assets, especially for investors with low account balances, as noted by Michael Houlihan, head of a private wealth management firm.
In the past, thousands of Australians who invested in cryptocurrencies through do-it-yourself (DIY) pension funds faced substantial losses, amounting to hundreds of millions of dollars. These risky bets put their retirement savings at risk, highlighting the potential pitfalls of investing in high-risk assets through self-managed pension schemes. Unlike professionally managed funds overseen by regulatory bodies, DIY pension funds operate without the same level of oversight, leaving investors vulnerable to significant losses. In the UK, for example, self-managed pension funds are not allowed to directly invest in Bitcoin or other cryptocurrencies, highlighting the stricter regulations in place in some jurisdictions.
Coinbase’s efforts to tap into Australia’s self-managed pension sector reflect the growing interest in cryptocurrencies among retail investors looking to diversify their portfolios. By offering tailored services to meet the specific needs of self-managed super funds, Coinbase aims to provide a reliable and secure platform for clients to trade and hold crypto assets. The increasing adoption of crypto products within the retirement savings industry underscores the need for regulatory oversight and investor education to ensure that individuals are aware of the risks involved in investing in volatile assets like cryptocurrencies. As the crypto market continues to evolve, it will be crucial for exchanges like Coinbase to navigate the regulatory landscape and provide innovative solutions to meet the changing needs of investors in Australia and beyond.
