With more and more crypto lending platforms freezing assets on their platforms there isn't a lot that people can do right now. It boils down to the good old saying "not your keys not your crypto". An issue that is becoming more and more pressing though is these withdrawal pauses were supposed to be temporary but have gone on for a couple of weeks now without any concrete steps being released for what is next.
Interestingly enough there is part of the United States tax code that is being discussed by some tax experts as usable for individuals whose assets have been rendered worthless or irrecoverable. In the tax code, there is a tax break offered to people who suffer from nonbusiness debt. This occurs when you lend to another party and that loan turns worthless and irrecoverable if you can get any payment from the party an individual would not qualify. Nonbusiness bad debt allows an individual to qualify for a short-term gains credit that is equal to the USD cost of what you lent. For example, if you bought Bitcoin at $1,000 and lent it to one of these platforms when it was at 1$10,000 you would be able to write off what you initially spent ie the $1,000.
Right now it is not even 100% certain that this deduction would be accepted however some certified public accountants are of the opinion it qualifies. Tons of other issues also arise if you take this deduction and how it impacts different things. While these issues and complications need to be paid attention to I personally see this from a different light. This is the first time we are hearing about people not completely losing everything and how they can qualify for some things like this deduction if they end up receiving nothing for the lending platforms collapse. As much as most of us hate the tax code due to its complications this does show that there are so many layers and loopholes in it that even people suffering from a crypto loss are able to benefit even while regulators claim the asset is unregulated!
Does it fix the issue or make up for what people lost? Of course not however even a small victory is still a victory and provides some relief to those who have suffered.
Please know I am not a financial advisor and make sure you do your own research! If you enjoyed this article and would like to further support me below are a few referral links that if you used when signing up I would appreciate it! Also, follow me on Twitter @Cje95_
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