Regulatory bodies are paying closer attention to Self-Managed Superannuation Funds (SMSFs) due to the increasing interest in and investment in digital currencies.
This heightened interest has prompted the Australian Taxation Office (ATO) to publish further instructional materials for SMSF trustees. A recent paper, released in May 2025, outlines crucial considerations for SMSF trustees when dealing with digital currency investments and offers essential guidance for navigating this landscape.
Understanding Digital Currencies
A digital currency is a virtual form of currency, existing separately from traditional (“fiat”) currencies issued by government central banks and treasuries worldwide.
Its digital nature stems from its creation through computer-driven algorithms, employing sophisticated cryptographic methods. Ownership changes are recorded in interconnected digital “blocks” that are designed to be immutable once created.
The ability to demonstrate and track ownership transfers independently of government oversight fueled the rapid proliferation of different digital currencies, beginning with Bitcoin in 2009.
Bitcoin was hailed as a groundbreaking step in “decentralized” finance, offering users a means of financial exchange supposedly beyond the control of governments or financial institutions.
Since then, a vast array of products has emerged under the umbrella term “crypto,” exhibiting significant variation in risk and return profiles.
As of July 2025, the number of digital currencies worldwide approached 37 million, although not all are active or significant, compared to just 500 a decade prior. The sector boasts a massive global market capitalization of US$3.95 trillion, with Bitcoin alone accounting for US$2.3 trillion.
Unsurprisingly, the surge in digital currencies has attracted both investors and speculators who see them as an alternative asset class with the potential for substantial capital appreciation, rather than as a medium of exchange for goods and services. Consequently, we will use the term “crypto asset” rather than digital currency going forward, as it more accurately reflects the current nature of these offerings.
Varieties of Crypto Assets
As previously noted, digital currencies like Bitcoin were the original type of crypto asset.
Several other forms of crypto assets have since appeared, including:
Non-Fungible Tokens (NFTs)
NFTs are tokens that record ownership of a digital item on a blockchain. This item might be a digital image or a representation of a physical object, but its defining feature is that each NFT is uniquely identifiable from all others.
Therefore, NFTs are classified as “non-fungible,” because no token can be replaced by another similar one. Holding an NFT, however, does not inherently grant the holder any rights to the underlying object it represents.
Stablecoins
A stablecoin is a type of crypto asset that aims to maintain a consistent value in relation to a reference asset or a basket of assets.
Stablecoins often attempt to closely mirror the price of a fiat currency (e.g., the US dollar), a commodity (like gold), or another financial asset, such as bonds or share indexes.
Various methods are employed to attempt to “peg” the price of a stablecoin to its chosen reference asset, ranging from directly backing the stablecoin with a trusted, stable external asset like US government bonds, to using algorithms to regulate the demand and supply of the stablecoin.
DeFi Tokens
DeFi tokens are generated through participation in different decentralized finance (DeFi) protocols.
These tokens are used within systems designed to decentralize particular financial functions, such as insurance, lending, and exchanges, frequently through organizations called decentralized autonomous organizations (DAOs).
DeFi is a relatively recent addition to the crypto asset world and is considered to be under development, which requires a cautious approach.
Can SMSFs Include Crypto Assets?
Yes, SMSFs can include crypto assets, provided specific conditions are met.
The ATO’s existing position is that crypto assets are a legitimate investment option for SMSFs provided that:
- The fund’s trust deed allows it
- They are in line with the fund’s investment strategy
- They adhere to all applicable superannuation laws, like any other SMSF investment. For instance, SMSF crypto assets must be:
- Held in the fund’s name (not in the names of individual fund members)
- Valued according to ATO guidelines (explained later in this article).
Therefore, amending an SMSF’s trust deed to explicitly include crypto assets as an approved asset class, along with their allowable allocations within the fund’s investment strategy, is considered a best practice.
The ATO began incorporating crypto assets into its SMSF statistics in 2018–19. At that time, crypto assets held totaled approximately $200 million. As of March 2025, that number had risen to $1.67 billion, but still represents a relatively small portion of total SMSF assets, which now exceed $1 trillion.
Notably, crypto asset holdings, as a percentage of total assets, are highest among SMSFs with smaller balances, suggesting that they might be more popular with younger members who have recently established an SMSF.