Hi there 👋
This tutorial introduces you to supporting loan transactions (borrowing) and shows you how to label these transactions.
Waltio provides support for crypto ↔ crypto or crypto ↔ Fiat loan transactions.
💡 Borrowing can be done on centralized platforms like Nexo or YouHodler, as well as on decentralized platforms like AAVE.
We include the value you have borrowed in the overall value of your portfolio, and we also include the collateral value in your overall portfolio value.
There are two possible scenarios for your transactions: borrowing crypto in exchange for crypto collateral or borrowing fiat in exchange for crypto collateral.
Let's see below, how to properly label your transactions:
Case 1: Borrowing cryptos with crypto collateral
In this transaction, you have borrowed a certain amount of cryptocurrency by collateralizing (= pledging) another amount of another cryptocurrency.
The amount of collateral (= pledging) will be kept in the overall value of your portfolio.
The collateral withdrawal transaction should be labeled as an “Add collateral”.
Then, several options 👇
If you have already repaid your loan :
The collateral will be returned to you and deposited in one of your accounts/portfolios.
The deposit transaction should be labeled as an “Collateral Reimbursement”.
Then the amount of the loan will be returned to the lender, thus being removed from your portfolio.
The withdrawal transaction should be labeled as an “Other Withdrawal”.
If your collateral has been liquidated in the interim:
The lender has used your collateral to pay back the loan (this happens when the price of the collateral crypto collateral collapses).
In this case, the collateral will permanently leave your wallet.
The withdrawal transaction should be labeled as an “Liquidation”.
💡 These crypto ↔ crypto transactions are not tax generating events.
Case 2: Fiat loan with crypto collateral
In this operation, you have borrowed a certain amount in Fiat by collateralizing cryptocurrencies.
The amount of collateral will be retained in the overall value of your portfolio.
The collateral withdrawal transaction should be labeled as an “Add collateral”.
Then, several options 👇
If you have already repaid your loan :
The collateral will be returned to you and deposited in one of your accounts/portfolios.
The deposit transaction should be labeled as “Collateral Reimbursement”.
If your collateral has been liquidated in the interim:
The lender used your collateral to repay the loan (this happens when the price of the crypto collateral collapses).
In this case, the collateral will be permanently removed from your portfolio, and you become the permanent owner of the loan amount.
This creates a transaction like selling crypto for fiat = the liquidation is therefore a taxable transaction.
Here is a simple example:
You borrow 1 BTC and deposit 15 ETH as collateral.
You withdraw 15 ETH from your wallet, which you deposit on a platform to make your loan. You receive a deposit of 1 BTC.
The collateral withdrawal transaction should be labeled as an “Add collateral” on Waltio.
You pay back your loan of 1 BTC, you get back your guarantee of 15 ETH.
You will have to label the transaction of deposit of your 15 ETH as “Collateral Reimbursement” on Waltio. The transaction to withdraw the refunded BTC should be labeled as an “Other withdrawal”.
If you have any other questions, do not hesitate to contact us via the chat just at the bottom right of your screen! 💬
The Waltio team