Can I claim losses on my Celsius assets?

Celsius is one of multiple platforms that have been affected by the liquidity crisis currently plaguing the crypto industry. On June 12, Celsius halted withdrawals, much to the chagrin of its users. In July, Celsius then filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the Southern District of New York. These developments have left users wondering whether they’ll ever regain access to their funds locked on the platform, a question whose answer could have tax ramifications.

Can I declare assets on Celsius as ‘lost’ for tax purposes?

As you can imagine, Celsius users aren’t excited about the prospect of paying tax for assets that they cannot access. Unfortunately, it’s currently unclear how users should treat crypto lost due to platform bankruptcy as there is ambiguity around whether or not they will eventually receive their assets back.

In Australia, the ATO has provided a list of guidelines outlining what requirements need to be met in order to claim crypto assets as ‘lost’.

In the US currently, any lost, stolen or hacked crypto cannot be claimed as a capital loss.

In the UK, you’ll have to file for a Negligible Value Claim with the HMRC in order to declare any assets as ‘lost’.

It’s important to note that in most situations, if you declare your assets as ‘lost’, you relinquish the right to claim them back if access is ever reinstated. We recommend talking to a local tax professional to determine what is the best way to treat your Celsius assets for tax purposes.

What about the staking rewards I earned, but couldn’t access?

Throughout the current liquidity crisis, some platforms (Celsius included) have continued to ‘pay’ staking rewards to their users, regardless of the fact that withdrawals from the platform had been paused.

In most tax jurisdictions, staking rewards are considered as ordinary income at the time of receipt. In usual cases, you would be required to declare these rewards as you would any typical income stream.

Once again, we recommend talking to a local tax professional to determine what is the best way to treat any staking rewards earned that cannot be accessed, as this could have a significant impact on your tax obligations.

How Crypto Tax Calculator can help

Our platform aims to make it as easy as possible for you to deal with curveballs like the Celsius situation. We have categorization options available if you wish to declare particular transactions as non-taxable via the ‘lost’, ‘stolen’ or ‘ignore out’ categories. We would like to wrap up this blog post by reiterating the importance of talking through your options with a local tax professional to determine what is best for you and your personal circumstances.