Crypto loans and taxation

Cryptocurrency lending is performed in the following way: the cryptocurrency of one user is provided to another user for a certain fee. The lending mechanism may be slightly different on different platforms, but the basic principles are the same everywhere. This service is available on both centralized and decentralized platforms.

You can not only borrow money but also receive passive income in the form of crypto interest account for placing cryptocurrency in the pool, which will manage your funds. The risk of losing money, in this case, is usually low, but it will depend on the reliability of the smart contract used. The safety of funds is guaranteed by the borrower providing collateral and the loan is managed by CeFi platforms. This article will try to answer the question are crypto loans taxable?

Diversifying investments

You can’t invest in just one thing, you should always distribute your investments wisely so that if a cryptocurrency falls, you won’t lose all your funds. By investing in different assets, in most cases, you ensure maximum profit with minimum risk. Diversification is considered the safest investment strategy.

With a cryptocurrency loan, you can purchase investment items such as other crypto assets, real estate, stocks, and businesses. Traditional financing options for the listed items are often frustrating, so it’s only natural to look for alternative solutions.


Mining is not banned in most countries. It is essentially the activity of using equipment to obtain assets. Some practical advice for miners:

  • The equipment you are mining on must be of legal origin. Either you officially import it, or you buy components and order the assembling of a miner that will be of local origin.
  • Using cash-purchased equipment without supporting documents for a commercial purpose is a bad option. Because if your equipment is seized during a search, you will have no way to get it back. No documents – no equipment.
  • For FLP, the situation is facilitated by the fact that the equipment does not need to be put on the balance sheet. It is enough just to have documentary evidence of the legality of its acquisition. For businesses on a common taxation system, setting on the balance sheet and commissioning are required.

It is important to have confirmation of the legality of the money for which your equipment was purchased. If we are talking about hundreds of thousands of dollars, you need to have a clear explanation to the regulatory authorities where you got it. Because they are going to ask. Usually, they pay attention to the fact that in the Declaration of property status, the individual did not declare sufficient income to purchase such expensive equipment. Pay for electricity in full and enter into appropriate contracts. Otherwise, there will be problems with the law.

About tokens and ICOs

Many people are interested in the question:  аre crypto loans taxable? This activity arouses the greatest amount of suspicion from the regulatory authorities. Some representatives see signs of fraud in the sale of tokens for money. In this regard, the tax structuring of ICOs takes place mainly not within the local tax laws. However, it should not be forgotten that a physical person who receives income in an ICO is obliged to declare such income and file a Declaration of wealth. Build your tax history thoughtfully and in advance.

Taxation and legal status

Today, cryptocurrency in some countries does not have a certain legal status. In particular, in such countries, there is no regulatory framework for the classification and regulation of transactions with it. However, to regulate legal relations regarding the circulation, storage, possession, use, and transactions with crypto assets, as well as to determine the general principles of operation and legal regulation of the market of virtual assets in a particular country.

Taking into account the above, income received by an individual from the sale of cryptocurrency is included in the total annual taxable income as foreign income if the source of income payment is foreign or as other income if income payment is made by an individual resident in the country.

In this case, the amount of funds, which is received by the taxpayer from operations with cryptocurrency, is subject to taxation. It should be noted that the issue is situational, and each specific case of the tax relationship should be considered taking into account the documents that relate to the issues raised.

According to the report of the Organization for Economic Cooperation and Development, many countries around the world have developed clear and detailed tax rules for transactions with crypto assets, both for individuals and companies. For example, in Finland, a taxpayer has the right to reduce his taxable income due to the cost of equipment and electricity in the process of mining cryptocurrency, provided that there is proper documentation. Moreover, the Finns make a legal distinction between mining and foraging as methods of cryptocurrency mining and set different tax rules for them.

The lack of legal regulation of crypto assets does not create any special advantages for taxpayers or the state. This legal uncertainty can generate a lot of abuse and litigation in the future. On the one hand, according to the tax authorities, a person should pay taxes on the income from the sale of cryptocurrency, on the other hand, the same person is not sure that he can protect his ownership of the crypto-asset in court.


So, due to the lack of legislative regulation of legal relations related to cryptocurrency, we can’t unambiguously assume that legal entities on a single tax can perform any operations with cryptocurrency. There is also no norm in the tax legislation which would fix the order of taxation of income received from this kind of operation. For our part, though, we still advise you to get individual tax advice on your situation before carrying out transactions with cryptocurrency.

In the meantime, we wait for the legislative regulation of this issue and rejoice at the news that there are already certain draft laws under consideration, which may regulate legal relations concerning how to legally use and conduct operations with crypto assets. Also, the relevant draft laws provide for the regulation of possession and storage of digital currency, as well as its circulation, and fix the general principles of functioning and regulatory regulation of the virtual assets market.

How important is credit in the markets?

On a fundamental level, credit markets increase the number of productive wages by redistributing them between those who have no immediate use and those who have them. These are significant improvements for both individuals and large institutional investors.


In addition to these utility improvements, this is also one of the few times that cryptocurrency provides an improved direct counterpart to the financial system when comparing savings account loan yields. As of this writing, most cryptocurrency platforms provide an interest rate of about 8% for stablecoin lending; by comparison, most savings accounts in the United States provide less than 1% return per dollar.

While this is a significant improvement to the crypto ecosystem, it does not provide the full benefits of true credit – because, in their current form, all cryptocurrencies are over-collateralized. This means that you must already have the capital to get a loan, which means that the cryptocurrency lending market is not “growing the pie.” This is especially frustrating when it comes to the underbanked and unbanked world population that needs expanded financial access the most.


CoinLoan helps you safely manage digital assets and earn money from cryptocurrency deposits. The company has developed an industry of loans secured by digital assets. Customers speak exceptionally positively about working with this service.

FTX Clarifies Difficulty In Bitcoin Transactions Amid FTX-Binance War

Bitcoin withdrawals and stablecoins redemptions are currently giving Crypto exchange FTX some trouble. Consequently, FTT tokens have decreased 5%.

Sam Bankman-Fried, the founder of Crypto exchange FTX, clarified rumors about illiquidity to users earlier and ensured them that deposits and withdrawals are working just fine. As some of their users faced difficulty removing their Bitcoin holdings from the crypto exchange, FTX revealed that it was due to a limited number of throughputs on nodes but the matching engine is still up and running smoothly. Moreover, they stated that Bitcoin (BTC) withdrawals will continue facing difficulties until banks open but stablecoins redemptions shouldn’t be affected by this issue.

In a series of tweets on November 7, crypto exchange FTX revealed that all processes, including the matching engine, are working smoothly. However, Bitcoin withdrawals on FTX are facing difficulties as node is throughput limited. The crypto exchange is switching to process Bitcoin withdrawals from both ends to help speed up the process.

“BTC withdrawals: churning through them; node is throughput limited. We’re switching it to process from both ends, which should help speed it up.”

FTX crypto-users are struck with anxiety as their transactions have been stuck for several hours now. As the FUD (fear, uncertainty, and doubt) concerning FTX and Alameda’s future plans continues to grow amongst investors, many people are beginning to draw comparisons between this event and an earlier liquidity crisis.

In addition, the crypto exchange has also alerted users that they may experience difficulty redeeming stablecoins. The message stated that creations and redemptions ofstablecoins might be slower until banks open and can process wire transfers. FTX holds reserves in banks and coverts to stablecoins when necessary.

The crypto market is feeling the effects of FTT’s liquidations and stopped withdrawals. Currently, the price of FTX Token (FTT) is $22.50- down five percent in the past day.

On November 6, Binance CEO “CZ” announced that the company would be selling all of its FTX Token (FTT) holdings over the next few months. In fact, Binance exited FTX equity last year and received $2.1 billion in FTT and BUSD. The firm has already transferred $584 million worth of tokens, causing the FTT price to fall by over 10%.

Several tweets about Alameda have surfaced recently. According to data, Alameda transferred 26,600 ETH and Blockfolio transferred 13,555 ETH to FTX as the crypto exchange’s ETH holdings declined sharply.

The Biggest Bear Markets Throughout History

After global markets saw an uptrend for two years due to quantitative easing, we have run into some serious obstacles. In fact, many believe we are currently in a bear market where stock prices are going down. This doesn’t just include stocks and cryptocurrency–it seems like everything is taking a hit these days. For example, Bitcoin is down 70% from its high point, and different stock indices have lost around 20%. With people’s confidence being relatively low right now, let’s take a look at some of the worst bear markets in history and see how people were able to recover afterward!

The Great Depression of 1929

The Great Depression of 1929 resulted in the biggest bear market in history. The stock market crash of September 1929 was the first domino to fall, triggering a chain reaction that led to many institutions collapsing.

Unemployment rates surged to 25% and the stock market tumbled by over 85%. It took the second world war to fix the damage, as it wasn’t until January 1945 that the market finally recovered.

The 2007 Financial Crisis

Lehman Brothers was one of the top four investment banks globally, underwriting over $80 billion in mortgage-backed securities. However, their lack of background checks allowed people who should never have qualified for a mortgage to get massive loans. This led to one of the biggest housing market bubbles in recent history.

Home prices taking a tumble is what started it all. Countless people defaulted on their mortgages, and as a result, investment banks’ portfolios were destroyed. Lehman Brothers was one of these firms, and they quickly collapsed. This brought the economy crashing down with them since so many businesses rely on stable markets. The S&P 500 lost nearly half its value in 18 months following the crash while most economies worldwide entered harsh recession periods .

The Dot-com Bubble

The Dot-com Bubble is a recent crash that stay fresh in the minds of many people. In the years preceding the new millennium, investor interest was through the roof for tech stocks.Sentiment surrounding these companies was so good that people would buy anything related to this market because of peer pressure . This went well until Nasdaq–that ran on internet frenzy–came screeching to a halt. The S&P 500 lost more than half its value and plenty of businesses didn’t make it out alive.

The Black Monday (1987)

The stock market crash on Black Monday in 1987 was so severe that it wiped out a quarter of the Dow Jones’ value in only one day. This event caused much panic and prompted global discussion. In 2020, the covid pandemic created another stock market crash, but it pales in comparison to Black Monday; The latter was twice as intense percentage-wise.

The 1973-1974 Stock Market Crash

In 1973, economists were optimistic. The markets had beengrowing steadily for years, and there was no reason to believe this would change soon. Even shortly before the crash, Time Magazine wrote about their expectation of another year of strong performance.

The global economy entered a recession, with the U.S. GDP growth rate falling from 7.1% to -2.1%. Inflation also rose sharply, reaching 12%. These effects were felt across the world, causing major indices to fall slowly over 700 days. This decline halved the value of the S&P 500 once again. The United States then fell into a period of stagflation, with inflation reaching 25%. It wasn’t until 1993 that American stock markets reached a new all-time high again.

The Cyprus Bust (2000-2013)

This bear market holds the record for largest percentage losses ever. After Cyprus Stock Exchange hit its highest point in November 1999, it entered what is considered the most brutal and devastating bear market globally. In a timespan of five years, it lost 92% percent of its original value.

The market indicated a dead cat bounce over several years, only to decrease by 86%. Then, in October 2013 it hit the bottom. From its 1999 peak value ,the market lost an unbelievable 99.2% of its total worthiness. That’s correct: after losing 90% of its cost, the market went on to lose ANOTHER 90%! The Cyprus economy never stabilized as you can see from the graph below.

Bitcoin’s Third Bear Market (2017)

With Bitcoin once reaching $20,000 only to fall by over 60% a short few months later, you’re likely not the only one this has happened to. And after many hacks resulting in bans and regulatory measures, December of 2018 saw Bitcoin hitting an ultimate low at $3,200.

The Shortest Bear Market Ever (2020)

The recent bear market, brought on by coronavirus, was the shortest one on record. The stock market crashed in early March, but it took just six months for it to recover its losses. With central banks worldwide turning to quantitative easing, this bear market marked the start of a sharp bull run that only lasted for a few months. But that bull run eventually led us to the current economic winter we’re experiencing now.’

HODL: What Does It Mean and Where Does It Come From?

The term HODL is a virtual currency slang word that has been heard by everyone who has ever conversed with someone in crypto.

HODL was coined when bitcointalk user GameKyuubi drunkenly ranted on the internet’s most popular forum. Bitcoin had just experienced a 39 percent decline in the previous day, and it was a difficult time to be a trader. He vented about being a terrible trader and vowed to simply sit on his profits after a couple of whiskeys. In his own words:

“I AM HODLING. BTC crashing WHY AM I HOLDING? I’LL TELL YOU WHY. It’s because I’m a bad trader and I KNOW I’M A BAD TRADER.”

GameKyuubi observed the error but never addressed it, for which we are thankful. GameKyuubi’s grammatical blunder was quickly noted by respondents, and the HODL theme emerged in the days that followed.

Although the post is amusing now, many of you may be able to relate to the pressures and challenges in cryptocurrency trading, not to mention how chaotic bitcoin trading was in 2013. Take a look at the chart!

“You only sell in a bear market if you’re a great day trader or an illusioned noob. Traders can only take your money if you sell in a zero-sum game such as this.” GameKyuubi finishes his drunken rambling with this excellent point:

The term “HODL” started out as a meme, but it has become common vernacular among investors. It signifies holding onto cryptocurrencies with an unyielding grip, or refusing to sell no matter the market conditions.

At the same time, Bitcoiners HODL as a kind of encouragement throughout crypto winters, literally reminding one another to HODL to their bags.

Since then, HODL has come to be known as an acronym for “hold on for dear life” more and more. Even though this wasn’t the original meaning, we think it covers GameKyuubi’s idea well. As he said himself, in a zero-sum game like trading, they can only take your money if you sell.

How to Short Ethereum

In recent weeks, the value of Ethereum’s internal cryptocurrency, Ether (ETH), has fallen by more than 25% from $11 to around $7.50. At the same time, rival digital currency Bitcoin (BTC) has gained 6.5%. Some are guessing that a series of flaws and setbacks in Ethereum code and security breaches have finally undermined its value and see prices falling even further. For those looking to profit from potential ETH price decreases, here is how to short it…

For investors seeking to take advantage of a falling market, short selling is an option where you can borrow assets that you don’t already own from somebody who does, then sell it in the market with the hope of buying it back at a lower price. Online cryptocurrency exchanges offer margin facilities to enable this type of borrowing. Some exchanges lend directly using their existing stock of cryptocurrency while others utilize peer-to-peer credit arrangements from other users. For example, Poloniex and Kraken offer P2P lending options while BTC-e offers direct margin lending.

If a trader believes that ETH will decrease in value when pitted against Bitcoin, they can buy Bitcoin and then trade it for Ethereum once the former has lost some value. While this won’t always result in a profit, it’s more likely to happen than if the trader had simply exchanged Ethereum for another cryptocurrency.

Recently, Ethereum’s cryptocurrency, Ether, has lost more than 25% of its value and some believe that the negative trend will continue. For those looking to make money from a falling price, online exchanges offer short selling using margin. Alternatively, traders can take the opposing position in ETH/another digital currency pairs.

Cryptocurrency Airdrop

Airdrops are a marketing tactic in the cryptocurrency world that involves distributing coins or tokens to wallet addresses in order to raise awareness of a new virtual currency.

The community members who are actively participating in the blockchain receive small amounts of free virtual currency, which they can use however they want. For example, sometimes people get paid for retweeting a post from the company that issued the currency.

Airdrops are a form of promotional activity undertaken by blockchain-based businesses to help launch a cryptocurrency project. Its goal is to raise awareness about the cryptocurrency project and encourage more people to trade in it once it goes live as an initial coin offering (ICO).

Companies will typically advertise airdrops on their website or various cryptocurrency forums. The coins or tokens are then distributed to current holders of common crypto wallets, like Bitcoin or Ethereum.

A recipient must maintain a certain amount of the cryptocurrency coins in their wallet to receive the free gift. Alternatively, they may need to accomplish a specific action, such as posting about the currency on a social media network, connecting with a blockchain project member, or creating a blog entry.

A legitimate crypto airdrop never seeks capital investment in the currency. Its aim is purely promotional. On other hand, some crypto scams involve sending micro amounts of bitcoin or other cryptocurrencies to unsuspecting recipients in what is known as a dusting scam. Users should always be vigilant about unsolicited deposits into their crypto wallets.

With the harsh competition among cryptocurrency startups, airdropping becomes necessary to make your startup noticeable. There are many businesses that offer assistance with crypto airdrops like alerts, listing services, and marketingfine-tuning. Unfortunately, not all of these businesses can be trusted…

Michael J. Casey, the Chair of CoinDesk’s advisory board and a collaborator at MIT’s blockchain research initiative, said in a blog post for CoinDesk that if a cryptocurrency is to succeed, it must have some form of marketing. “A currency is meaningless unless people use it frequently. And you can’t achieve widespread usage unless someone makes an investment in order to stimulate usage,” he added.

However, there have been warnings from others in the industry about cryptocurrency airdrops. For example, Pierre Rochard, the creator of Bitcoin Advisory, tweeted that crypto airdrops can be pump-and-dump schemes. That is, the owners of the cryptocurrency might be artificially boosting its value to make a quick buck.

“Watch out for give-away scams like this: 1. Pre-mine tokens for yourself and your friends immediately 2. Exchange the pre-mined coins with each other to inflate the price 3. Use a ‘give away’ of the tokens as bait for retail investors 4. Retail investors promote the token on your behalf, selling it shortly after.”

What is a Cryptocurrency?

What is a Cryptocurrency?

A cryptocurrency is a virtual or a digital currency that is designed to work as a medium of exchange and it uses cryptography to secure transactions. The cryptography has made it very hard to counterfeit cryptocurrencies. Investors are going for cryptocurrencies due to the fact that it is organic in nature; the digital currencies are not subject to government interference since they aren’t issued by any central authority.
Cryptocurrencies began in 2009 when Satoshi Nakamoto unknowingly invented Bitcoin while he was trying to develop a digital cash system. He invented it so as to prevent double spending as the digital currency will be completely decentralized and with no server or a central authority to interfere with it.

How do they Differ from Regular Currencies?

The main difference that separates cryptocurrencies and regular currencies, otherwise known as fiat currency, is the fact that cryptocurrencies are decentralized.This means that there is no institution that controls the supply of the currency or imposes rules and regulations over the currency. Fiat currency is normally produced by governments or central banks, who have control on the supply. They can decide to increase or decrease supply when they see fit.

The idea of having a central body in charge of your money has always been a point of concern for a lot of people. Cryptocurrencies are a breath of fresh air because a consensus makes decisions and there is no middle man when it comes to transactions.

How to Start Trading Cryptocurrencies?

The quickest and easiest way to trade cryptocurrencies is to trade using leverage. This means that you do not need to go through the process of actually buying the asset.
To trade this way, you must open an account with a broker. You can have an account open and funded within the hour! Everything is very quick nowadays.

What is Leverage?

Leverage essentially means you are borrowing a certain amount of money needed to invest or to take a trade. In most cases, you are borrowing from a broker.Different brokers offer different levels of leverage, meaning that you can either take less risk by putting less on a trade because the broker will cover the rest. Or, it allows you to put on a larger position. A larger position results in larger returns but as with all trading, it also results in larger losses.

As highlighted, leverage allows you to put less capital down, which in turn frees your capital for other investments or trades.

This happens by trading derivatives of the asset you want exposure to. Likely instruments include futures contracts and Contracts for Difference (CFDs).

What are Cryptocurrency CFDs?

Contracts for Difference or CFDs are instruments that give you exposure to certain markets without actually owning the underlying asset. They allow you to trade on the difference between two prices.They are a separate market to the actual asset but they do offer you extra liquidity. This is because they access liquidity from the underlying assets market as well as the liquidity from the CFD market.

If you were to imagine trading oil. When you buy oil, you do not receive a barrel of oil to your door. The process of receiving the asset would be a nightmare and the same can apply to cryptocurrencies. Therefore if it suits the investor, it is advisable to trade using CFDs.

Why Trade Cryptocurrencies on Leverage?

As highlighted in the CFD FAQ, trading on leverage means you do not need to go through the, sometimes, long process of buying the underlying asset.Another advantage of trading on leverage is that because you are borrowing from the broker, you can borrow from the broker and sell without owning the product. This allows you to short sell a market. Resulting in you being able to take advantage of a market going up and down.

This essentially doubles your trading opportunities. No longer must you wait for a market to pull back before buying it, now you can sell it down to that level and then buy it back up!