How To Invest In Bitcoin As A Minor

Investing in Bitcoin and other cryptocurrencies is an enticing prospect for many young people eager to dive into the world of digital currencies. While there is no minimum age or legal restriction to buying Bitcoin, age does present a barrier to entry. Most major crypto platforms and exchanges require users to be at least 18 years old, necessitating parental involvement for minors. This article will explore the options available for minors to invest in Bitcoin, the associated risks, and the importance of financial literacy for young investors.

Crypto accounts for minors

It is possible for minors to own cryptocurrency, but they cannot sign up for a crypto wallet and purchase it themselves. Instead, they will need the help of a parent or guardian to set up a crypto investment account. This can be done through a custodial account, joint account, or another type of account that allows the child to earn crypto without directly buying it.

Custodial Accounts

Custodial accounts are owned by minors but managed by parents or guardians. Uniform Transfers to Minors Act (UTMA) accounts can hold a range of investments, including real estate, stocks, mutual funds, and cryptocurrencies. Adults make the investment decisions, but the assets belong to the beneficiary and are transferred to them once they reach the age of majority.

Joint Brokerage Accounts

Joint brokerage accounts are typically co-owned by spouses, but any two people, providing at least one is an adult, can open a joint account. Both owners have equal rights and say in which investments to buy. A multi-signature cryptocurrency wallet might be suitable for those who want joint ownership, as these wallets require two or more private keys to sign and send a transaction.

Crypto Wallets for Minors

While minors are not usually outlawed from having a crypto wallet, registered exchanges and wallet providers will not allow children to sign up for one. However, parents or guardians can open a crypto wallet for their child through a custodial account.

Crypto Apps for Kids

There are also crypto apps designed for children, such as EarlyBird and Step, which allow adults to open a crypto wallet for a child through a custodial account. The Step app also includes an "invest" function that allows children aged 13 and older to buy and sell Bitcoin for a small transaction fee.

Tips for Opening a Crypto Account for a Minor

When opening a crypto account for a minor, it is important to consider the following:

• Investment account type: Decide on the type of investment account, such as a custodial or joint account, that best suits your needs.
• Investment selection: Check that the crypto your child wants to invest in is available on the account.
• Security: Consider whether to store your child's crypto in a hot wallet (connected to the internet) or a cold wallet (offline). Hot wallets are simpler to use, but cold wallets are more secure.
• Crypto exchange: Choose a registered and trusted crypto exchange. Be wary of any exchange that claims to be FDIC-insured.
• Fees: Pay attention to any opening fees, monthly costs, and transaction prices. Generally, it is best to opt for an account with low fees, but a feature-rich account may be worth paying more for.

Final Thoughts

While there are ways for minors to invest in crypto, it is important to remember that investing involves risk. Crypto should be part of a well-rounded portfolio and should not hold a child's entire savings.

Age restrictions

There is no legal age to buy Bitcoin or other cryptocurrencies for children in any part of the world. However, many popular crypto exchanges have age restrictions and do not allow users under 18 to sign up and buy/trade cryptocurrencies. In the US, all reputable securities exchanges require investors to be at least 18 years or older to invest, and this applies to crypto too. Coinbase, for example, does not offer custodial accounts for minors.

Minors cannot buy, sell, or trade any type of securities. But a parent or custodian can buy crypto on a child's behalf, or let them earn crypto without purchase. This can be done through a custodial account, joint account, or another type of account that allows the child to earn crypto without directly buying it.

If a minor wants to invest in the crypto space, they will almost certainly need to enlist the help of a parent or guardian. Adults can help kids set up a crypto investment account and help the child invest money in cryptocurrencies.

There are also some apps that let kids earn crypto. For example, the free Step Visa Card is a unique "hybrid" secured credit card that's tailor-made for kids and teens. It has the safety features of a debit card but functions like a Visa credit card, including the ability to build a child's credit history.

There are also crypto exchanges that do not require ID verification, allowing individuals under 18 to purchase crypto anonymously. Bybit is one such platform, offering various payment options, low trading fees, and no ID verification. Other options include MEXC, Weex, KuCoin, Margex, PrimeXBT, and Bisq.

In most countries, there is no specific law making it illegal to buy crypto when under 18. However, many of the best crypto exchanges have their own regulations, banning anyone under 18 from signing up and buying or trading Bitcoin and other cryptocurrencies.

Recommended exchanges

If you are a minor looking to invest in Bitcoin, there are several exchanges that can facilitate this. However, it is important to note that many popular crypto exchanges have age restrictions and do not allow users under 18 to sign up and trade cryptocurrencies. Nevertheless, here are some recommended exchanges that you can consider:

• Bybit: This exchange is often recommended for minors looking to buy crypto due to its various payment options, low trading fees, and lack of ID verification requirements.
• MEXC: Another option for minors, MEXC offers its own set of features and benefits tailored towards users under 18.
• Weex: Weex is also suggested for users under 18, although specific details about its features are not readily available.
• KuCoin: While KuCoin does have KYC regulations, they are not strictly enforced for users trading small amounts of crypto. Minors can create an account and start trading Bitcoin and other cryptocurrencies without verification.
• Binance: Similar to KuCoin, Binance allows users to create an account and trade without strict KYC requirements. The trading threshold without verification is 2 Bitcoins per day.
• LocalCryptos: LocalCryptos is a trusted peer-to-peer crypto marketplace where users can buy and sell Bitcoin securely and instantly.
• Decentralized Exchanges (DEXes): Platforms like Bisq, HodlHodl, and Localcryptos.com are decentralized exchanges that match buyers and sellers anonymously. Minors can use these platforms to buy Bitcoin without going through KYC processes.
• Freelance Websites: If you have skills such as software development, web development, or content writing, you can offer your services on freelance websites and earn Bitcoins as payment. Some recommended websites include Pompcryptojobs, CryptoJobs, and BitGigs.
• Bitcoin ATMs: Although there may be hefty transaction charges, Bitcoin ATMs can be a safe way for minors to buy and sell Bitcoin. You can use the ATMradar site to find one near you.

Please note that the above information is provided as a general guide, and it is always important to do your own research and consult with a financial advisor before making any investment decisions.

Legal considerations

In most countries, there is no specific law prohibiting minors from buying cryptocurrencies. However, there is also no legal age for buying Bitcoin or other cryptocurrencies. Despite this, many of the best and most reputable crypto exchanges have their own regulations, banning anyone under 18 from signing up and trading. These exchanges require users to be at least 18 to comply with "Know Your Customer" (KYC) laws, which are SEC-enforced regulatory guardrails against fraud and money laundering.

Therefore, if a minor wants to invest in crypto, they will need an adult's help. A parent or guardian can open a joint or custodial account, allowing the minor to hold crypto. The minor can also obtain crypto from sources other than a major exchange, such as apps that let them earn crypto.

It is important to note that some adults choose to buy and hold cryptocurrencies themselves, intending to sell the assets and gift the fiat money to their children once they become adults. However, this method may have tax consequences.

Additionally, it is worth mentioning that while there is no age restriction on owning crypto, children are not allowed to buy, sell, or trade securities of any kind until they reach the age of maturity.

Gifting crypto to minors

Another way to gift crypto to minors is through a custodial account. A custodial account is managed by a parent or guardian, but the assets belong to the minor. A common type of custodial account is the UGMA (Uniform Gifts to Minors Act) account, which is offered by companies like EarlyBird through their app. With EarlyBird, parents or guardians can download the app and start investing for a minor. Loved ones can contribute to the account without needing their own EarlyBird accounts and can even record short videos to personalize their gifts. Once the minor turns 18, the account transitions into a standard adult brokerage account that they can continue to use.

It is important to note that there is no minimum age requirement to own cryptocurrency. However, most major crypto platforms and traditional brokerage firms won't let minors buy crypto until they become adults. Therefore, minors will need the help of a parent or guardian to set up a crypto investment account.

Frequently asked questions