Hello 👋
This tutorial introduces you to support for loans (borrowing) transactions and shows you how to label these transactions.
Waltio provides support for crypto ↔ crypto or crypto ↔ fiat loan transactions.
💡 Loans can be made on centralised platforms such as Nexo or YouHodler, as well as on decentralised platforms such as AAVE.
We include the value you have borrowed in the overall value of your portfolio and also retain the value deposited as collateral (= collateral) 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 take a look below at 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 collateralising (= pledging) another amount of another cryptocurrency.
The amount of collateral (= pledging) will be retained in the overall value of your portfolio.
The collateral withdrawal transaction should be labelled as "Collateralisation".
There are 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 labelled "Collateral repayment".
The amount of the loan will then be returned to the lender and removed from your portfolio.
The withdrawal transaction should be labelled "Other withdrawal".
▶️ If your collateral has been liquidated in the meantime :
The lender has used your collateral to repay the loan (this happens when the price of the crypto deposited as collateral collapses).
In this case, the collateral will be permanently removed from your portfolio.
The withdrawal transaction should be labelled "Liquidation".
💡 These crypto ↔ crypto transactions are not taxable events.
👉 Here's a simple example:
You borrow 1 BTC and deposit 15 ETH as collateral.
You withdraw 15 ETH from your portfolio, which you deposit on a platform to complete your loan. You receive a deposit of 1 BTC.
The collateral withdrawal transaction should be labelled "Collateral placement" on Waltio.
You repay your loan of 1 BTC, you recover your collateral of 15 ETH.
The transaction for depositing your 15 ETH should be labelled "Repayment of collateral" on Waltio.
The transaction for withdrawing the repaid BTC should be labelled "Other withdrawal".
Case 2: borrowing from Fiat and using cryptos as collateral
In this transaction, you have borrowed a certain amount in Fiat by collateralising cryptocurrencies.
The amount of the collateral will be retained in the overall value of your portfolio.
The collateral withdrawal transaction should be labelled "Collateralisation".
There are 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 labelled "Collateral repayment".
▶️ If your collateral has been liquidated in the meantime :
The lender has used your collateral in order to repay the loan (this happens when the price of the crypto deposited as collateral collapses).
In this case, the collateral will be permanently removed from your portfolio and you will become the permanent owner of the amount borrowed.
This gives rise to a transaction similar to the sale of crypto for Fiat = the liquidation is therefore a taxable transaction.
The withdrawal transaction should be labelled as a "Payment", so that it is read as a taxable transaction.
👉 Example:
You borrow €30,000 and deposit 1 BTC as collateral.
At the time, the BTC price was €40,000.
The BTC price falls and your BTC is liquidated...
This is a taxable transaction similar to a sale of 1 BTC.
The withdrawal transaction (1 BTC) should be labelled as a "Payment", so that the transaction is read as a taxable transaction.
If you have any further questions, don't hesitate to contact us via the chat at the bottom right of your screen! 💬
The Waltio team