Rule Breaker's Guide to Cryptocurrencies, Part 2: How to Buy Cryptocurrencies… When You're a Teen

In this Rule Breakers podcast, Motley Fool co-founder David Gardner recruited Fool analyst Aaron Bush to help him with Cryptocurrencies 101. Turns out that a fair number of his listeners wanted more. So this week -- with bitcoin trading at more than twice the level it was for the previous episode -- he brought Aaron back for a more advanced encore.

In this segment, they respond to a regular listener who is also a teenager. He's interested in less mainstream cryptocurrencies, but buying them is no easy task when sites like CoinBase won't let minors open their own accounts. David and Aaron have some suggestions that may help him surmount those issues.

A full transcript follows the video.

This video was recorded on Dec. 6, 2017.

David Gardner: I'm going to close it out with a note from Daniel Scrugham. Now, I've gotten to know Daniel just a little bit through his notes to our podcast Mailbag. He's 15 years old. He's in Knoxville, Tenn. And we've answered one or two of his questions before. He wrote in, Aaron, and I'm glad that I'm getting to share this question with you, because you, yourself, were once a young teenager tapping those days back into The Motley Fool figuring out the world of the stock market.

Here's Daniel, kind of in analog, and this time he's trying to figure out this world of cryptocurrency. Here's the note, and I quote. "I am facing problems with the details of making a cryptocurrency purchase." This is back, earlier, once again to how do you actually do this thing. "Most major exchanges only allow bitcoin or Ethereum or Litecoin" -- that's L-I-T-E coin -- "so would I have to buy those and then exchange them somewhere else for the small, less-common cryptocurrency?

"In addition, I have even more problems because I'm a minor. I'm under 18." Not that kind of miner -- the minor with an "o," not an "e.". "I'm under 18. Unlike my brokerage account, I haven't found any way to make a custodial account on a website like Coinbase, and I don't know if it would be a good idea to have one of my parents make an account there, buy coins with my money, and then just give them to me when I was 18. If not, wouldn't it be best to use a wallet to buy the cryptocurrencies where my age would not matter? I don't know if I could do this, and then you factor that I can only spend $500 on cryptocurrency, gets even more difficult.

"Everything seems so complicated. I would really appreciate any help or advice from you or specifically Aaron Bush" -- and you're right to call out Aaron and not look for help from me, Daniel -- "on how I, as a 15-year-old, could buy cryptocurrency with U.S. dollars."

Aaron Bush: All right. So there's a bit to unpack there, but I think I can answer this pretty quickly. So at the most fundamental level, there is no age discrimination in mining and in buying and holding something like bitcoin. However, to open an account somewhere like Coinbase or to open an account with exchanges, in which you would trade bitcoin in for another cryptocurrency -- or U.S. dollars for another cryptocurrency -- you will have to prove your identity, and I think all those places, as far as I know, do follow 18-plus rules. So that is a bummer.

I don't think custodial accounts exist yet. I think there might be two paths. One would be consider mining or consider following something along that path, actually joining in the ecosystem. You might not have to buy it, but maybe you could buy it with your electricity, in other words, where you can put up your machine to figure out how to support the ecosystem and get compensated for that. So find something that you believe in and join that network. That might be a way depending on the crypto asset, to get involved.

Beyond that, if you don't want to do that, the best suggestion I have is to open something under a parent's name and then once you turn 18, create a new account and then transfer it into your account. That should be fairly easy. And if the tax laws transfer from how they work with equities and cash into cryptocurrency, then you will be able to transfer a certain amount tax-free without triggering any form of gift tax. Ar least in my experience, that's how that's worked. I'm assuming those laws will probably solidify before you turn 18.

So I don't know if that's a great answer. Unfortunately, there are limitations, but I still think there are ways to sort of get around that problem.

Gardner: A solid answer, and I'll just add, Daniel and everybody else. Whether you're 15, 55, or 105, there's a lot of value just to leaning in and listening. There's value for you having spent this time with us that you did today, to listen to Aaron talk more about this, even if you or I are not speculating -- and that's what it is, right now -- by buying some bitcoin or bitcoin gold. Litecoin. Bitcoin cash. Even if you're not doing that, just think about the value to you of your world perspective, and how you think about investing, and looking in at technology going forward.

It's kind of like even if you didn't buy Amazon.com when it IPO'd back in 1997, if you were paying attention, it gave you a lot of insight into where the world was headed, and even if you didn't buy that stock in 1997, you still did pretty well if you bought it in 2002. And if you were figuring out the world over those five years, especially if you're 15, Daniel, there is a lot of value right there. So congratulations to you, sir!