SALT announces first-ever distributed custody model for securely storing collateral assets, onboards Fireblocks as first partner

This new model will allow SALT to distribute risk, enhance security, reduce interest rates, fund loans more swiftly, and focus on expanding its suite of wealth preservation products

We’re excited to announce Fireblocks, a platform that secures digital assets in transit, as our first partner for securely storing and transferring customers’ collateral assets. The partnership with Fireblocks marks a shift in SALT’s business model from self-custody to a more distributed custody approach that will allow us to onboard additional partners in the future and add greater flexibility for capital providers. This new approach also enables us to distribute risk, fund loans and conduct transactions more quickly, and provide customers with enhanced security for their cryptoassets, as well as lower interest rates on crypto-backed loans.

“When SALT was founded in 2016, custody wasn’t where it is now, so we built a proprietary custody solution to keep our customers’ collateral assets safe,” said Justin English, CEO of SALT. “Now that the industry has matured and companies like Fireblocks have come to the forefront, we’re excited to work with them to streamline our operations and expose their networks to our suite of wealth preservation products. They have a proven ability to safely and securely store and transfer collateral assets and to do so swiftly, which will inevitably allow us to provide faster service to our customers and focus more on product development.”

The move toward third-party custody solutions will also enable SALT to provide greater security and flexibility to capital providers that may prefer to work with a specific custodian, provided the custodian meets our rigorous security standards.

“MPC has quickly become the industry standard among the largest and most trusted institutions in the digital asset space,” said Michael Shaulov, CEO and co-founder of Fireblocks. “We’re proud to partner with the SALT team to help them strengthen security, reduce costs and expand operations as they move into the next stage of their growth.”

Fireblocks meets these security standards by combining multi-party computation (MPC) with Intel SGX technology to create a proprietary, defense in-depth approach to digital asset security — this allows organizations to accelerate operations without relying on physical hardware or slow, manual processes.

“Security is our top priority as we make this shift to be commensurate with our growth and distribute risk among trusted custodians,” said Dirk Anderson, chief technology officer at SALT. “The primary reason we’ve chosen Fireblocks as our first partner is because of their approach to MPC technology. Not only does it meet our security standards, but it will grant us more flexibility and increase the speed at which we can conduct transactions. This means we can fund stablecoin loans much faster and reduce the turnaround time for returning customers’ collateral assets once their loan has matured.”

From a customer standpoint, the biggest and most exciting changes to note are increased security, faster services, and the offering of lower interest rates. Aside from these changes, the customer experience will largely remain the same. Just as they do now, borrowers will still be able to make deposits and withdrawals, and will be able to continue tracking the health of their loan via our Loan-to-Value monitoring and real-time notification systems.

“We believe working with Fireblocks and other custody partners in the future is in the best interest of both the business and our customers,” said English. “Not only will we be able to offer more competitive interest rates, but we will have the time and resources to focus on expanding our offerings to include products that are designed to help our customers build and preserve their wealth.”

To apply for a loan or learn more about our suite of wealth preservation products, visit https://saltlending.com/getaloan/ or contact [email protected]. For questions contact [email protected].

About SALT

SALT, the pioneer of crypto-backed lending, offers a way for individuals and businesses to use their cryptoassets as collateral to secure a fiat or stablecoin loan without having to worry about credit checks. SALT offers flexible loan terms and accepts multiple cryptoassets as collateral including cryptocurrencies, stablecoins, and tokenized gold. SALT also offers competitive interest rates and does not charge origination or prepayment fees. As cryptocurrency becomes more widely adopted and additional real-world assets become tokenized, SALT’s mission is to offer solutions that make it possible for people to securely hold, manage, and borrow against their cryptoassets. Founded in 2016, SALT is headquartered in Denver, Colorado. For more information, visit www.saltlending.com or follow us on Twitter, Facebook and Medium.

All SALT loans are subject to KYC, AML, and other Terms, Conditions, and Restrictions. Please see saltlending.com/terms and FAQ for additional information. Loan options and terms may not be available in your jurisdiction, for your loan amount, and/or collateral type. SALT Loans are subject to jurisdictional limitations and other restrictions. SALT may not be able to offer a loan to all borrowers. SALT loans are originated by Salt Lending LLC. NMLS #1711910. NMLS Consumer Access (https://www.nmlsconsumeraccess.org/).

About Fireblocks

Fireblocks is an enterprise-grade platform delivering a secure infrastructure for moving, storing, and issuing digital assets. Fireblocks enables exchanges, custodians, banks, trading desks, and hedge funds to securely scale digital asset operations through the Fireblocks Network and MPC-based Wallet Infrastructure. They have secured the transfer of over $70 billion in digital assets and have a unique insurance policy that covers assets in storage & transit. For more information, please visit www.fireblocks.com.

Media Contacts

SALT

Kendra Staggs, [email protected]

Fireblocks

Yelena Osin, [email protected]

The Evolution of the Crypto Market and its Role in Asset-Based Lending

Originally published in ABF Journal

Cryptocurrency is a disruptor. Not only has it changed the way we conduct business, but it has changed the way we think. The most obvious manifestation of how cryptocurrency has disrupted our thought patterns is in the way we think about money — about who issues it, how to transact with it, how to put it to work and how to keep it safe. It also has changed the way we think about our government, our right to privacy and our financial freedom. What’s less obvious is how cryptocurrencies are disrupting the way we think about and participate in asset-based lending. The advent of Bitcoin catalyzed the creation of a myriad of cryptocurrencies, many of which became viewed as assets, yet at the time, there was no way for crypto investors to unlock the value of these assets without selling them. This is the problem SALT’s founders set out to solve in 2016 and in doing so successfully, made asset-based lending as we once knew it a thing of the past.

Creating a New Asset Class

As Bitcoin began to experience wider adoption following its release in 2009, it became clear that some investors were purchasing crypto to trade on a daily basis while others were choosing to invest long-term, viewing Bitcoin more as an asset than as a spendable currency. As more investors adopted this long position and began to think of cryptocurrencies as an asset class in their own right, the term “HODL” emerged in 2013 on a bitcoin-talk forum and has since become one of the most commonly used words in the crypto vernacular. This HODL culture has grown significantly over the years and has evolved to where investors are buying, selling and trading these assets not only for themselves but on behalf of others. This activity has taken the form of crypto portfolios and crypto funds, which offer access to this new asset class for individuals and allow them to diversify their portfolios while eliminating some of the overhead of learning how to purchase and safely hold cryptoassets. By providing a way to collateralize cryptoassets to secure a cash or stablecoin loan, SALT provides opportunities for individuals, businesses and capital providers to build and preserve wealth.

How to Lend Cryptoassets

As the first-ever crypto-backed lender, SALT has developed the technology and processes required to successfully lend against cryptoassets, giving borrowers a way to unlock the value of these assets without selling them. Take Bitcoin for example. It’s one of many cryptoassets we accept as collateral on our platform, yet it makes up more than 80% of the collateral securing our loan book.

What makes Bitcoin a strong form of collateral? The answer lies in Bitcoin’s combined characteristics. Like gold, Bitcoin is scarce, fungible, divisible, transferable and durable. It is also extremely liquid given it is traded on global exchanges every day. Additionally, as a decentralized asset, Bitcoin is highly secure. All of these properties make Bitcoin both a viable asset and a highly efficient form of collateral that has piqued the interest of some of the largest financial institutions in the world.

One thing to note is Bitcoin’s volatile nature, which can pose challenges specifically for the ABL market. However, SALT’s risk management technology effectively manages this volatility. Our technology includes real-time loan-to-value (LTV) monitoring, margin call and liquidation triggers, real-time notifications and the safekeeping of assets through institutional grade custody solutions. For example, our loan-to-value (LTV) monitoring system tracks the prices of assets 24 hours a day, 365 days a year, providing borrowers with the ability to monitor the health of their loan in real-time. If, during periods of heightened volatility, a borrower’s collateral declines in value and their LTV breaches our margin call threshold, we protect the borrower by issuing a margin call that prompts them to take action to restore the health of their loan. Actions borrowers may take include paying down principal or depositing additional collateral to recalibrate their LTV to an appropriate level (70%). If no action is taken and asset prices continue to decline, SALT has the ability and the right to liquidate collateral assets to preserve lender capital. The overcollateralized nature of our loans combined with our risk management technology and ability to liquidate assets enables us to protect the lender, and as a result, we’ve experienced zero losses of principal to date.

Choosing a Crypto-Backed Lender

SALT’s business model is attractive to crypto investors (e.g. traders and asset managers) and businesses (e.g. mining operations and exchanges) for a few reasons. First, we provide access to liquidity, offering loans ranging from $5,000 to the millions. Typical use cases include businesses seeking working capital to fund operational costs and large capital expenditures, or investors seeking leverage, diversification or risk management. Second, since our model is asset-based and requires overcollateralization, we do not rely on a borrower’s credit profile and can fund loans within 24 to 48 hours, assuming the borrower meets our strict AML/KYC requirements. Third, customers know their assets are safely and securely held with institutional-grade custody providers for the duration of their loan. Fourth, our loan process is straightforward and customizable. We allow borrowers to lend against a single cryptoasset or a portfolio of cryptoassets and offer flexible loan terms, including durations ranging from three to 12 months, LTVs up to 60% for individual loans or up to 70% for business loans, and competitive interest rates ranging from 5% to 12% depending on the borrower’s jurisdiction, loan amount and LTV. While we are no longer the only crypto-backed lender in the world, we are one of the few that incorporate a human element into our business model. Unlike completely automated lenders, SALT offers both phone and online support, and assigns each customer a loan support specialist at the time of loan origination. These human touches positively impact a borrower’s experience with the platform; they know that by choosing SALT, they will always have the option to speak with someone about their financial needs.

The Evolution of the Crypto Market and Tokenization

Since SALT’s founding in 2016, the crypto lending market has grown exponentially. According to a report from Credmark, the crypto lending market reached $8 billion in total lifetime loan originations as of Q4/19 and has since surpassed $10 billion following Q1/20. These numbers not only indicate the growing demand for liquidity among crypto holders but also the growing interest among capital providers to get involved in the crypto market. For example, we’ve witnessed an influx of both crypto native (BitGo Prime and Genesis Capital) and traditional financial institutions (Silvergate) that provide leverage and liquidity vehicles at the institutional level.

Another thing to consider regarding the evolution of the crypto market is that as the world becomes tokenized, the very definition of the term “crypto market” is changing. With the emergence of companies like Paxos and Harbor, we’re beginning to see increased tokenization of real-world assets like gold and real estate. At SALT we already accept Pax Gold (a gold-backed cryptoasset) as collateral on our platform and our vision for the future goes well beyond our current collateral scope.

The Role of Alternative Investments

As crypto becomes more widely accepted, a growing number of people are assessing their own risk profiles and determining the best way for them to participate in the crypto market. For those with lower risk profiles, the market has evolved in recent years to offer individuals or businesses indirect exposure to this new asset class. As previously mentioned, crypto portfolios and crypto funds are part of this evolution along with alternative investment companies like Cadence (portfolio company of Coinbase Ventures). Cadence is a securitization platform for private credit that grants access to exclusive high yield, short term investments traditionally reserved for institutions. In February 2020, we partnered with Cadence to offer prospective investors the opportunity to gain exposure to cash flows associated with a portfolio of underlying loans collateralized by cryptoassets. The first note of $500,000 was oversubscribed in five days and we have since worked with Cadence to issue $2.9 million in notes to investors to date. As more companies like Cadence provide structure, liquidity and indirect exposure to alternative asset classes like crypto, we expect to see even greater demand from investors seeking attractive risk adjusted returns.

Opportunities for Institutional Investors

There’s no doubt cryptocurrency has changed the way we think about asset-based lending. It has formed a new asset class and also has catalyzed the trend of broader tokenization — a trend that will inevitably expand the universe of collateral options and have a meaningful impact on the ABL industry. If you’re a decision maker at an institution and are interested in learning more, email [email protected] to discuss opportunities to build and preserve wealth in this rapidly evolving industry.

SALT Adds Newly Released PAX Gold as Collateral Option in First Regulated Gold-backed Blockchain Asset

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We’re proud to announce that beginning October 1, 2019, we will offer the just released PAX Gold (PAXG) as our latest collateral type for clients seeking to use their digital assets as collateral to secure a USD loan. PAX Gold, an asset-backed digital token on the Ethereum blockchain is Paxos’ first blockchain asset to represent precious metal; its value is tied directly to the spot price of gold quoted by the London gold market.

By tokenizing gold, Paxos is bringing the benefits of physical gold ownership to the cryptocurrency community. PAX Gold is built as an ERC-20 token on the Ethereum blockchain network. As a digital representation of physical gold, PAX Gold has the potential to increase the overall liquidity of gold by connecting traditional markets with cryptocurrency markets.

“Precious metals are ideal for tokenization. Gold, as an example, has well-established institutional physical custody and a broad base of investors familiar with the asset class,” said Jenny Shaver, Chief Operating Officer at SALT. “Gold has traditionally been held as a hedge against inversely correlated assets like stocks and fiat currency, so it provides digital token holders with familiar asset diversification options. By offering PAX Gold as our newest collateral type, we’re adding value for our customers by combining the benefits of gold investing with easy access to funds via crypto-backed lending.”

With the addition of PAXG, SALT customers will not only have a wider variety of collateral options, but by using PAXG as their primary collateral, they will be able to maintain a more stable Loan-to-Value Ratio for the duration of their loan.

Founded in 2012, Paxos is a regulated financial institution with a suite of products including the most traded alternative USD-backed stablecoin, the PAX Standard. By integrating PAX Gold as the first widely available physical asset available on a blockchain, we’re taking a step toward realizing our financial vision of a blockchain-based system where the value of traditional assets can be unlocked and used in manifold ways.

“PAX Gold is the first regulated digital asset that allows holders to own the underlying physical gold,” said Scott Simpson, VP of Strategic Partnerships at Paxos. “Unlike fiat currencies, gold has intrinsic value and Paxos allows users to physically redeem their PAX Gold tokens for actual gold. With PAX Gold, people can more easily access this market and with SALT, customers can easily leverage gold like never before.”

“We as a community have been discussing the tokenization of commodities for quite a few years, but Paxos has been the first to make it a reality by representing gold on the blockchain. This is a big step forward for the crypto industry. This brings a new level of transparency to traditional investors by enabling them to see their physical gold represented on the Ethereum blockchain, meaning they can immediately verify ownership,” said Rob Odell VP of Product and Marketing for SALT. “SALT is proud to be a part of this advancement by offering PAXG as a collateral option for crypto-backed loans. Not only does it invite traditional investors to become SALT customers, but it will enable us to be more flexible and creative with our LTV options and loan terms. In fact, if we see significant demand for this product, I think SALT is prepared to re-evaluate our interest rate calculator and open the doors to LTV options as high as 85%.”

Gold has historically been a popular store of value, with the price of Gold increasing by an average of 10% per year since President Nixon took the US Dollar off the gold standard in 1971. With a worldwide market capitalization above $3 trillion, gold is physically scarce, widely traded and offers high liquidity — three key factors that make it not only a viable asset to lend against, but a salient collateral choice for us. Given the current instability in the bond and currency markets, gold’s long-term returns are more comparable to stocks and higher than bonds or commodities.

With the addition of PAX Gold, we now offer loans collateralized by Bitcoin, Litecoin, Ether, Dash, DOGE, BCH, PAX Standard, USDC, and USDT.

SALT, Dash and Staking: SALT’s Rob Odell Interviewed by Dash News

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Recently we announced the support for Dash as collateral for loans, a feature we were excited to release given the demand from you along with the cryptocurrency’s potential to further financial inclusion around the globe.

Our VP of Product and Marketing, Rob Odell, recently spoke with Dash News about the platform, noting that $100,000 worth of Dash could secure a loan up to $70,000 — perfect for situations where you require cash but are reluctant to sell your cryptocurrency.

Rob qualifies the addition of Dash as “one of the most innovative inclusions that we’ve worked on since the launch of the platform.” We’ve integrated it in such a way that, while custody of the Dash itself is delegated to our platform, you retain the masternode rights so you can continue to earn payouts and voting rights from staking. With comprehensive insurance and the benefit of not commingling assets, this further ensures that SALT can provide you with highly secure storage options — something that may be more convenient and less risky than taking custody into your own hands.

This ability for you to maintain your masternode status, while utilizing your assets as collateral is an industry-first, and Rob dives into this further with Joël.

Listen to the full interview for more details and follow these step-by-step instructions to custody or borrow against your Dash with us and still run your masternode.

SALT Partners with NODE40 to Offer Fiat Loans for Dash Masternode Owners

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As part of our commitment to supporting the Dash community, we’re excited to announce our partnership with NODE40, the blockchain masternode hosting and monitoring provider. The partnership will provide expanded loan options for DASH masternode owners in tandem with the Dash community’s first masternode hosting service.

Given its long-term viability, its numerous use cases, and its level of adoption, Dash is an appealing collateral form for SALT’s platform. In our April 2019 announcement, we affirmed our commitment to support the Dash community and its mission, noting our respect for Dash’s two-tier network that uses masternodes to maintain the viability of its blockchain.

“Our development team has made a technological breakthrough and has advanced our mission by unlocking value and liquidity in cryptocurrency assets through collateralizing the Dash connected to masternodes,” said Rob Odell, VP of Product and Marketing at SALT. “Dash has quickly become our second most popular collateral option behind bitcoin and the community has reacted positively with a high volume of loan applications. We’re excited to work with NODE40 to increase our support for the Dash community and provide innovative solutions and services for masternode holders to get the most out of their assets.”

A Dash masternode serves to expedite transactions and scale the network by relaying them over a second-tier network. While Bitcoin’s second layer is an off-chain solution to scale, Dash runs an on-chain second layer using masternode operators who are incentivized by the network like miners in bitcoin. In March 2015, NODE40 was the first company to provide network infrastructure to host masternodes. According to dash.org, each masternode pays out approximately six Dash (currently just over $1000 USD) per month in mining rewards.

“Our companies’ shared dedication to customer service naturally brought us together when a mutual client wanted to take out a fiat loan using their masternode’s Dash. What attracted us to SALT was the caution with which things are done; they have a solid reputation of doing things by the books,” said Perry Woodin, Co-Founder and CEO of NODE40 and a Dash Trust Protector. “Having been a part of Dash from early on, we tend to do things conservatively, and that was important to us when evaluating how a loan is backed and if our customers would be protected in the case of an audit. With SALT we share the vision of being cutting edge while playing by the rules not only to protect ourselves, but to bring legitimacy to the industry.”

DASH holders must prove ownership of 1,000 DASH to obtain masternode status and have the right to vote on treasury proposals and receive recurring payouts. However, if at any point, the Dash is moved, the node will be brought offline and will downgrade immediately, stripping the node of its master status. With SALT’s new system, Dash holders can move their Dash to our platform and maintain their masternode status as well as their voting and payout rights, all while using the associated funds as collateral for a loan.

The key to this software integration comes from a recent Dash update, DIP3, which introduces pro registration transactions. Instead of referring to another transaction from the network to sign a message as proof, a “proreg tx” refers to an output produced by the transaction itself, which in turn acts as proof of ownership. Dash holders can now collateralize the Dash connected to their masternodes by parking their funds in our insured cold storage — the signature used to move those funds validates ownership, allowing users to continue participating in the network.

If you’re interested in using your Dash to secure cash loan with us, visit https://saltlending.com/dash/ to get started.

What to Expect When the Value of Your Collateral is on the Decline

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Your collateral is what protects your loan. It’s why SALT doesn’t need to perform income checks or credit checks when issuing a loan. But cryptocurrencies are volatile, so what happens if the value of your collateral begins to fall? Declining collateral value negatively impacts your Loan-to Value-Ratio (LTV) — that is the amount of outstanding principal still owed on your loan divided by the value of your underlying collateral: Outstanding Principal / Value of Collateral. LTV is the key metric SALT uses to determine the health of a loan. The lower the LTV, the healthier the loan. If the value of your collateral goes up, your LTV goes down. If the value of your collateral goes down, your LTV goes up. It’s that simple.

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Choosing your Loan-to-Value (LTV)

When choosing your LTV, the most important consideration is your risk tolerance. We offer starting LTV options of 30%, 40%, 50%, 60%, and 70%. If you go with a 30% LTV, you are choosing the safest level of overcollateralization, or cushion. With a 70% LTV, you won’t have to deposit as much crypto to begin with, but you’ll have the least amount of cushion. The higher the starting LTV, the higher the risk. Choose the LTV option that’s right for you.

What can you expect from us when your collateral declines in value and your LTV begins to rise? Lots of notifications.

If your collateral continues to go down in value, your LTV will steadily climb. As your LTV crosses certain critical thresholds (75%, 83%, 88%, and 90.91% as of the time of this writing) SALT’s robust monitoring and notification technology kicks in to help protect your loan.

  • At 75%, we give you a heads up, letting you know to monitor your loan more closely given your collateral is declining in value.
  • At 83%, we inform you that things are not looking so good, and you may want to consider paying back some of the loan or depositing extra collateral.
  • At 88%, we issue a final warning to let you know that if you don’t pay back some of the loan or deposit more collateral, you run a high risk of having your assets liquidated.
  • At 90.91%, SALT is contractually obligated to liquidate a portion of your collateral in order to prevent the lender from losing their investment.

After all, lenders wouldn’t be willing to lend the money in the first place if SALT couldn’t guarantee its safety.

How you respond to a rising LTV and warning notifications is up to you. Here are the current options:

  1. Pay back a portion of the loan — You can make a payment in USD via wire or ACH, or you can make a payment using a stablecoin instead. SALT currently accepts PAX, USDC and TUSD. With this option, you are choosing to lower your LTV by paying down the principal on your loan.
  2. Deposit more collateral — You can quickly and easily deposit additional collateral (it can be the same collateral your loan is backed by or a different collateral type that we offer). With this option, you are choosing to lower your LTV by increasing the total value of the underlying collateral.
  3. Do nothing — You can choose to ignore the warnings. If your collateral continues to decline in value, SALT may eventually be forced to liquidate a portion of your assets on the open market.

We’ve done the math to show you how each of these options impacts your assets, remaining principal, and required payment.

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Based on the above calculations, if you want to avoid any loss of assets, it’s best to respond as quickly as possible with options one or two. Otherwise, option three is available if that’s what you prefer. Either way it’s important to think through the options and know where you stand before your LTV crosses our liquidation threshold.

Keep tabs on your loan health from anywhere via the real-time LTV widget on your web dashboard or by logging into your account through our mobile app.

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It’s on us to monitor your loan health and keep you updated. It’s on you to take action (or not take action) when your collateral value is on the decline.

Considerations for Filing Taxes as a Crypto Holder in 2020

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Disclaimer: This article is for informational and educational purposes only and does not constitute tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors when filing your taxes.

While the tax deadline has been extended from April 15, 2020 to July 15, 2020 due to the COVID-19 crisis, it’s still a good idea to file as soon as possible, especially for those taxpayers who are expecting a refund. For crypto holders, it’s important to note that for the first time ever, this year every tax-paying American will be getting quizzed explicitly on their crypto activity. Indeed, the 2020 season will mark the first time the following question appears right at the top of the 1040 tax form:

“At any time during 2019, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”

This year however, federal tax forms ask about your bitcoin and other cryptocurrency activities, the latest move to more directly specify details for cryptocurrencies. The IRS is focusing on those who may be underreporting their crypto transactions or not reporting them at all.

What does this new sentence in your tax form this year really mean, and how should it impact how you report crypto in your 2019 taxes? To help understand, we asked SALT experts, along with our partners and friends at Node40TaxBitBlox and Friedman LLP.

Know Your Cost Basis

The first thing to know is that one is taxed on profit — the key figure to find out is the gain number. The most recent set of guidance from the IRS was released in October 2019 and it included a few methods of “cost basis assignment” mentioned therein. For those who aren’t accountants, this means one of a few ways to track profits and losses. Know your cost basis and what the IRS deems taxable. Most importantly, know your “gain number.”

Cost basis means the price at which you initially acquired an asset. For example, if you hold one BTC today, which you previously purchased at $9,000, and the price today is $11,000, the cost basis is that acquisition price of $9,000. So, the unrealized gain number (without selling) and the realized gain number (if you were to sell) is the net between today’s price and the cost basis, meaning in this case $2,000.

Cost basis can also mean the fair market value of the asset on the date of acquisition. For example, you received one BTC from work as compensation for services on 1/1. The value of BTC on 1/1 is $9,000. Later when you sell one BTC at $11,000, the then fair market value of $9,000 would be the cost basis, and you would realize $2,000 gain. The fair market value can be determined using a reasonable method, such us prices on any third-party independent trading platforms, as long as the same method is applied consistently for all your crypto transactions.

Loan collateral does not count as a transaction

For SALT customers, it’s important to know that your crypto held as collateral for a cash or stablecoin loan does not count as a taxable transaction unless your collateral is liquidated; a liquidation is a taxable event. If your collateral increases in value during the course of your loan term, this does not count as a gain or taxable action unless the collateral is sold. According to Friedman LLP, should you have a business loan with SALT, take note that business interest is deductible and subject to limitations (generally 30% of adjusted taxable income if the business had more than $25 million gross receipts). While interest on personal loans is generally not deductible, it may be deductible if you are self-employed and you use the loan for your own business or if you are employed but you use the loan to make other investments that generate income (the loan then becomes a business loan or investment loan).

First-In-First-Out (FIFO)

First-In-First-Out (FIFO) is the default accounting method. Your cost (the price at which you purchase a crypto asset) is calculated at the initial purchase date. So, if you buy a Bitcoin in January, another in March, and sell one in June, the “cost” isn’t from March, but January. The first “in” is the first purchasing transaction. First “out” is the first one sold. With digital currency the date of purchase and sale are clear in the coins and tokens themselves, making reporting much easier.

The aforementioned guidance from the IRS clarifies how to calculate your gain number.

By way of example: assume you purchase one BTC on 1/1 for $10,000, one BTC on 2/1 for $15,000, and then sell one BTC on 3/1 for $12,500 — your taxable gain or loss using first-in-first-out is computed by taking $12,500 of proceeds less your cost basis of $10,000 (which comes from the earliest purchase of BTC). This results in a $2,500 taxable gain.

While FIFO is the default method, the IRS makes it clear that the Specific Identification method can also be used if a taxpayer can document unique digital identifiers such as a private or public key. The acceptance of specific identification is favorable for taxpayers, as it allows taxpayers to assign their highest cost basis lots first, which in return minimizes their tax liability.

More details on this specific topic can be found over at Taxbit’s blog here.

Be Careful Using 1099s from Exchanges

If you have been buying crypto through exchanges, the exchange may have sent you a 1099-K or 1099-B form. Even if you did not receive these documents, all the 1099 methods of calculating income are still valid for you. The exchange calculates and reports gross proceeds, meaning that it is on the taxpayer to provide information on the cost they paid to acquire said assets and reported in the capital gains section, otherwise known as IRS 8949.

Specifically, form 1099-K reports gross proceeds, which the IRS interprets as income. The number reported on form 1099-K is not counted as income however, as cryptocurrency trading carries cost basis and is to be reported in the capital gains and losses section of a taxpayer’s tax return. Form 1099-B reports cost basis when available and makes it easier for you as a taxpayer to complete your required IRS 8949. Some cryptocurrency exchanges may not send you anything at all. Regardless of which form you receive or don’t receive, your responsibility as a taxpayer is to use the information to complete your IRS 8949, which reports your capital gains and losses.

Verify the Data You Receive

The crypto industry is still relatively new and while the exchanges and trading technology may have some advanced reporting features built in, the institutions built around that technology are still new. With traditional securities, there is a clearinghouse, a broker, and well-established financial statements that make it easy to determine your taxes. With cryptocurrency, many of the exchanges are still in the process of refining external reporting standards. This means that, as a user, the level of completeness in reporting expected from NYSE cannot possibly be replicated by virtually any new institutions.

According to data by NODE40, the reports generated by cryptocurrency exchanges will be incorrect for about 80% of cryptocurrency traders. We can’t fault the exchanges because there is simply no way for them to determine the cost basis of the assets you’ve been moving around. For this reason, it’s important to consider using a third-party platform that can calculate the gains and losses on your cryptocurrency as you move it from exchange to exchange or wallet to wallet.

Conclusion: Educating Ourselves is Essential

Crypto accounting and tax reporting can be daunting and complex, which is why staying engaged with news and trends is essential to understanding the evolving landscape of crypto taxation. Especially in the U.S, the IRS is taking more steps to introduce greater guidance and clarity. But without proper education and trained professionals, navigating crypto tax can be tough.

Tax preparers and investors rely on 1099 forms in traditional markets — crypto is no different. Without it, the burden of responsibility shifts to the investor, requiring them to keep track of all of their crypto activity for the year. This includes tracking every crypto-related transaction, like fair market value based on the date of purchase or sale of assets.

All of this information is vital for preparers to determine cost basis and properly calculate gains and losses. Therein lies the primary challenge. Some crypto accounting and management platforms have emerged to solve this growing industry need for smarter solutions. Industry giants need reliable, accurate and smart tools.

Because crypto remains a new field and exchanges are widespread around the world, not all exchanges report in the same method. This is why the savvy users will double check the work of the exchange, a task for which there are now new tools available. These errors can have a massive tax impact, particularly when it comes to tracking the cost of acquisition of the asset over time. Luckily there are tools that exist that can provide traders and crypto entrepreneurs with intelligent support.

Taxes are a part of life. This year hundreds of millions of Americans will be reminded explicitly of the existence of digital assets — a good thing for the industry that will drive greater awareness and adoption of cryptoassets. If you’re already a crypto hodler or trader, diligence is key to successfully filing your 2019 taxes this year. Whether you use a third-party tool or rely solely on exchanges to track the movement of your assets, it’s crucial that you know your gain number and verify its accuracy, that you review the IRS guidelines, and that you use trusted sources to educate yourself on what to report and how to go about it.

SALT Adds DASH as Collateral and Offers a Way to Maintain Your Masternode

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We’re proud to announce that we now accept DASH as collateral.

Better yet, if you own DASH that’s being used for a masternode, we’ve also developed a way for you to maintain your masternode status, voting rights and payouts and still use it as loan collateral. To do so, follow these instructions before you deposit your DASH into your SALT collateral wallet.

Like other cryptocurrencies, Dash enables anyone, anywhere in the world to make quick, easy and cheap payments at any time without going through a central authority.

Given its long-term viability, its numerous use cases, and its level of adoption, Dash is an appealing collateral form for our platform. Aside from that, we chose Dash as our next collateral type for two primary reasons:

  1. We support the Dash community and its mission
  2. We respect Dash’s two-tier network and use of masternodes to maintain the health of their blockchain

The Dash Mission

In his interview with Cointelegraph, CEO of Dash Core Group Ryan Taylor notes that Dash offers “tremendous value to society,” particularly for people that live in areas with minimal financial freedom and poor quality financial systems: “I would love to see Dash first adopted in some of the poorest and most financially oppressed markets in the world, so that as Dash grows, we bring those people up with us.”

By providing increased financial freedom, secure technology, and irreversible, speedy transactions, Dash is increasing access for people to participate in the global economy regardless of where they’re based. We support this mission and recognize it as one of the most significant ways blockchain technology can change people’s lives — and the world — for the better.

The Dash Network and Masternode System

In a separate, more recent interview with Anthony Pompliano, Taylor explains the concept of masternodes and how unlike the Bitcoin protocol, which allocates 100% of the network’s revenue toward mining, the Dash protocol is designed such that the block reward is split into three parts: 45% of the revenue goes to miners and 45% goes to masternode operators who service the network. The remaining 10% goes to a proposal system where the proposals are voted on by the masternode operators and the highest ranking proposals pay out as part of a monthly budget. This two-tier infrastructure ensures that network participants are incentivized to “keep the network happy.” Masternode operators in particular have a vested interest in doing what’s best for the network to maintain its health.

In explaining the masternode system further, Taylor notes that you have to prove ownership of 1,000 DASH in order to obtain masternode status, though he makes it clear that “as soon as that money is moved, your node downgrades immediately.” While that’s true in most cases, we’ve developed a way for you to maintain your masternode status even after you move your Dash to the SALT platform.* With these step-by-step instructions, you can custody your Dash with us and still run your masternode.

For questions about taking out a Dash-backed loan or to custody your Dash with us, visit us at https://saltlending.com/ or call us at +1 720–897–3710.

  • Dash used as collateral for a loan with SALT may be liquidated, in whole or in part, according to the terms of your Loan Agreement. SALT is not responsible for maintenance of a masternode or any disruption to or downgrade of any masternode for any reason, which may result from a liquidation of loan collateral or any other applicable term or terms of your loan agreement.

SALT Now Offers Loan-to-Value (LTV) Options Up to 70%

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We have increased our range of Loan-to-Value (LTV) options, allowing you to tailor the loan product that is right for you. In addition to our existing 30%, 40% and 50% LTV options, you can now select up to a 60% or 70% LTV, allowing you to unlock even more value from your crypto holdings.

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While starting your loan at 70% LTV means you need less loan collateral to get started, it may lead to higher risk for you as the borrower. This is why SALT has been focused on creating tools that allow you to manage the risks associated with your loan based on your own tolerance.

● Customizable notification system — When you sign up for a SALT account, you automatically receive email alerts about your account activity. From our website or mobile app, you can customize your notifications even further by opting in to calls, texts and/or push notifications.

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● Loan-to-Value (LTV) monitoring system — This near real-time system reports your loan health (in LTV) and portfolio value through the life of your loan. Even when you aren’t watching your portal for updates, our automated notification system helps keep you up-to-date via calls, texts and emails so you’re alerted during volatile market conditions.

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● Mobile app — Our mobile app allows you to register for an account, monitor your collateral and loan status, and deposit or withdraw assets.

Download the app for iOS and Android.

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● TrueUSD and USDC — With the recent addition of these stablecoins to our accepted collateral types, you can stabilize your LTV at anytime by transferring TrueUSD, USDC, or a combination of the two directly to your account — even on nights, weekends and holidays.

SALT Expands Lending Opportunities to Businesses in Australia

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Having participated this week in the ADC Global Blockchain Summit held in conjunction with the South Australian Government and the Australian Digital Commerce Association (ADCA) in Adelaide, SALT is actively incorporating its technology services into the burgeoning Australian market. With a particular focus on strategies and practical applications for business growth via blockchain technologies and systems, SALT spoke to the Summit’s key topics from experience intersecting business, public policy, and the regulatory environment.

Australia has demonstrated a keen interest in developing its blockchain industry. The Ministry for Industry, Science and Technology today announced a blockchain roadmap with AU$100,000 in federal funding for “regulation, skills and capacity building, innovation, investment, and international competitiveness and collaboration.” Working directly with blockchain businesses at the ADC Summit, SALT is deploying its Software as a Service packages, which allow traditional companies to easily add cryptocurrency and blockchain offerings into their product portfolio including lending technology, wallets, monitoring, and blockchain analysis. With Australia’s continued commitment to developing blockchain services responsibly, SALT looks forward to working with interested parties and stakeholders across the Australian market to bring their vision into reality.

Crypto companies looking for extra liquidity to expand their businesses, such as exchanges or mining companies, can join SALT and apply for a crypto-backed loan.

As SALT continues to grow, we remain focused on further expanding our technology products, allowing both crypto and traditional companies to integrate blockchain services into their software stacks.