Working out whether you are a crypto trader or investor at tax time can be…
Crypto Lending: Helio
Selling cryptocurrency can add to your tax obligations. Crypto Lending provides crypto holders with the ability to unlock the value of their crypto without selling it.
Cryptocurrency, like any other medium of value storage and transfer, is subject to close scrutiny from tax authorities. If you’ve made significant gains on your cryptocurrency investment, the tax man is likely to be very interested when the time comes for you to “cash out” your crypto holdings.
Any trade in which cryptocurrency is exchanged for fiat currency is a taxable event, which makes many crypto investors hesitant to liquidate their crypto holdings. There are times, however, in which short-term cash shortfalls require traders to sell crypto investments.
A new Melbourne-based platform offers an alternative to crypto liquidation in the form of crypto-backed loans — Helio is Australia’s first licensed crypto-backed loans entity, and aims to provide crypto holders with instant cash without selling off their cryptocurrency portfolio.
In this article, we’ll take a look at crypto lending, find out how it works, and investigate the potential applications of using providers like Helio as part of a cryptocurrency tax strategy.
What is Helio?
Helio, founded by John O’Shea, is a fully-licensed lender based in Melbourne that is the first organization in Australia to offer crypto-backed loans. The growing crypto-backed loans marketplace has recently exploded in the US and Europe, with multiple platforms now offering crypto holders the ability to leverage their crypto assets in order to obtain cash loans — without selling any of their crypto.
Helio is a streamlined, easy to understand platform that keeps the crypto-backed loans process simple. Users are able to use a variety of different cryptocurrencies as collateral for loans, which include Bitcoin, Ethereum, Litecoin, and Ripple.
It’s easy to understand why crypto-backed loans are so popular — with no credit checks required, borrowers simply pass a quick identity check and submit cryptocurrency as capital, typically receiving same-day approval.
Interestingly, Helio is aimed at both individuals and businesses, and is focused on providing crypto-asset backed loans to the largely underserviced Australian industry. As the Helio platform is fully licensed, borrowers are protected by ACL and ASIC laws, making it a more attractive option to Australian borrowers than international platforms.
Why use Helio?
The biggest benefit delivered by Helio is the option for cryptocurrency holders to access liquidity on crypto-assets without selling them outright. Another major advantage offered by Helio is the complete lack of establishment fees or ongoing monthly account fees.
Unlike many other forms of investment, cryptocurrency is relatively easy to liquidate in times of financial need. Helio offers cryptocurrency holders the ability to overcome short-term financial deficits or access capital without completely eliminating their position in the market — when the loan is repaid in full, Helio releases the borrowers cryptocurrency back to them.
How Crypto Lending Works
Getting set up with crypto lending is relatively simple. Interest rates with providers like Helio start at 9.5 percent per year, with a minimum of $500 and a maximum of $5,000,000. Borrowers select the type of cryptocurrency they would like to use as collateral, select a loan amount and term, and designate loan-to-value.
There are a few important points to note regarding the way crypto lenders handle the volatile nature of the cryptocurrency market. Should the underlying asset of the loan fall below 95 percent of the loan amount, providers like Helio might be forced to liquidate the collateral.
The way the lender handles crypto custody is also important — the assets used as collateral in Helio loans for instance is managed in partnership with Switzerland-based ETHlend, ensuring that collateral is held in an extremely secure manner.
Crypto Lending & Tax
Cryptocurrency tax is extremely complex — there are many cases in which crypto traders have neglected to fulfil their tax obligations or submitted inaccurate data as part of a crypto tax return. In some cases, crypto traders can be hit with a large tax bill.
To help offset this, Helio offers crypto traders the ability to leverage the value of their cryptocurrency in order to obtain a Helio loan and pay their tax bill, without completely losing their crypto assets.
It’s best to engage the services of a professional tax agency that specializes in cryptocurrency tax in Australia to ensure you’ve got everything straight before you submit your tax return. If you’re unsure of your tax obligations particularly around crypto lending or crypto tax returns, feel free to get in touch with Fullstack today.
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Stuart Reynolds is the founder of Fullstack Advisory, an award-winning accounting firm for businesses leading the future. He is a 3rd generation accountant who specialises in tech companies, crypto and entrepreneurs.