As Bitcoin continues to mature into a widely recognized long-term store of value, many investors are exploring how to hold it within retirement accounts.

Bitcoin IRAs have been available for several years, but until recently, the options were limited and came with trade-offs. Investors had to choose between managing their own keys, which added complexity for the end investor, or relying on a single custodian, which carried greater counterparty risk.

To solve these challenges, a more resilient approach has emerged: a custody model built on proven multi-signature infrastructure, where responsibility is distributed across multiple independent institutions. This is known as multi-institution custody, designed to offer both simplicity and security.

This article will walk you through what a multi-institution Bitcoin IRA is, how it works, how it compares to other IRA models, and whether it may be a fit for your long-term investment and retirement goals.

How Bitcoin Custody Works in an IRA

For the first decade of Bitcoin’s existence, custody has taken two main forms for both direct ownership and retirement accounts:

• Single-custodian IRAs, often using centralized exchanges or trust companies like iTrust Capital or Bitcoin IRA
• Self-custody IRAs with collaborative custody, such as Unchained’s model, where the client holds one of the keys

The introduction of Bitcoin ETFs in January 2024 created an additional way to gain exposure to Bitcoin in tax-advantaged accounts by holding ETF shares rather than the asset directly.

Each model involves trade-offs between control, convenience, cost, and security.

Collaborative custody gives you direct control of keys, which appeals to some investors. However, it also introduces operational complexity, particularly in terms of inheritance and long-term security. Additionally, there is regulatory uncertainty around whether this model complies with IRS rules for tax-advantaged accounts. If investors can move funds without any third party, it may not meet the custody requirements.

Even setting regulation aside, many investors are uncomfortable managing their Bitcoin for years or decades, where a small mistake could lead to permanent loss.

On the other end of the spectrum, single-custodian IRAs simplify the experience but introduce counterparty risk. In these models, a single institution controls your Bitcoin. If that institution experiences a loss, hack, or operational failure, your assets could be at risk.

Bitcoin ETFs follow a similar model, utilizing a single custodian, but they also introduce additional counterparty risk from the ETF sponsor, the brokerage, and the fund administrator. While convenient, this adds more layers of potential vulnerability.

Multi-institution custody was designed to address these problems. In this model, three independent institutions each hold a key in a two-of-three multisig vault. No single party can access or move funds unilaterally. Clients retain legal title, maintain on-chain visibility, and benefit from a custody structure designed for resilience.

As retirement allocations grow and investors seek long-term peace of mind, this model offers a compelling combination of security and simplicity.

How Multi-Institution Bitcoin IRA Works

A multi-institution Bitcoin IRA combines a self-directed IRA structure with institutional-grade custody distributed across multiple parties. Here’s how it works:

• A two-of-three multi-signature vault is established, with three independent institutions each holding one key
• No single party can access or move funds on its own, preventing loss due to compromise
• The IRA is legally titled in your name or entity
• Bitcoin is held in a segregated wallet, fully visible on-chain for 24/7 transparency and verification

This model eliminates single points of failure while reducing the operational burden of managing hardware wallets or seed phrases, featuring transparency in holdings and redundancy for long-term storage.

We published a deeper dive on multi-institution custody if you'd like to explore the underpinnings of this model in more detail.

Benefits of a Multi-Institution Bitcoin IRA

A multi-institution Bitcoin IRA offers a unique combination of security, simplicity, and transparency for long-term Bitcoin holders. Key benefits include:

• Eliminates single points of failure - No single custodian can lose, mismanage, or unilaterally move your Bitcoin
• No key management required - You do not need to manage devices or seed phrases
• Legal clarity - Assets are titled in your name and held in a segregated wallet within a self-directed IRA
• Streamlined inheritance - Beneficiaries can be designated up front, making inheritance planning simple and secure
• On-chain transparency - You can independently verify your Bitcoin holdings at any time
• In-kind transfers - If you already have a Bitcoin IRA elsewhere, you can transfer your Bitcoin directly without selling
• Insurance included - Coverage of up to $100 million per incident through Lloyd’s of London
• Preserves tax advantages - Depending on the IRA type, gains may grow tax-deferred (Traditional) or tax-free (Roth), including support for SEP and Solo 401(k) accounts
• Peace of mind - Built specifically for long-term Bitcoin holders who want resilience without complexity

Tradeoffs of a Multi-Institution Bitcoin IRA

Every custody model comes with tradeoffs, and multi-institution Bitcoin IRAs are no exception. While they offer a high level of security and simplicity, there are a few considerations to keep in mind:

• You do not hold a key - While this reduces the operational burden, it may feel unfamiliar to investors who have managed self-custody
• IRA limitations still apply - Retirement accounts generally restrict access to funds until age 59 1/2. Early withdrawals may be subject to penalties and taxes
• Trust in process is still required - while there’s no single point of failure, you depend on three institutions to manage your Bitcoin
• Time out of the market - If you are rolling over from a Bitcoin ETF or another provider that does not support in-kind transfers, you may need to sell and repurchase Bitcoin, creating a short window without exposure

Worth noting: If you already hold Bitcoin in an IRA structure, you may be eligible to transfer it in-kind into a multi-institution custody vault. This allows you to maintain exposure without needing to sell the asset, minimizing risk and simplifying the transition into a more secure model.

Who Might a Multi-Institution Bitcoin IRA Be Right For?

This model may be a strong fit for investors who:

• Plan to hold Bitcoin long term and want to reduce their tax burden
• Want peace of mind without managing keys or hardware or relying on a single custodian
• Are thinking seriously about inheritance and multi-generational wealth
• Have existing IRA or 401(k) assets they’d like to roll over into Bitcoin
• Prefer a purpose-built custody model designed for long-term security, transparency, and legal clarity

Should You Use a Multi-Institution Bitcoin IRA? Final Takeaways

Bitcoin IRAs are not a new concept, but their structure is evolving. Multi-institution custody offers a way to hold Bitcoin in a retirement account that prioritizes security, transparency, and long-term resilience.

By combining the tax advantages of an IRA with a custody model that distributes risk across multiple independent institutions, this approach gives investors a more durable foundation for their retirement strategy.

If you are thinking seriously about how to protect your Bitcoin over decades and want to avoid the trade-offs of managing keys or relying on a single provider, a multi-institution Bitcoin IRA may be worth considering.

Learn more about our multi-institution custody solutions. → https://www.onrampbitcoin.com/products/multi-institution-custody

Our team is here to support you in your decision-making process. We’ve guided thousands of clients and can help you make the right decision for your circumstances - book a consultation.