How are crypto loans taxed?

This is a guest post from our Authorized Partner at CoinLedger.

This post is for informational purposes only and is not a substitute for professional legal and tax advice.


Taking out a cryptocurrency loan (a loan secured by crypto assets like Bitcoin and Ether) can help you save thousands of dollars on your tax return.

While selling your cryptocurrency is a taxable event, taking out a crypto-backed loan is typically tax-free.

In this guide, we’ll break down everything you need to know about how crypto loans are taxed. By the time you’re finished reading, you’ll understand why taking out a crypto-backed loan can be a fantastic strategy for tax savings.

The basics of cryptocurrency taxation


Before we jump into the tax implications of cryptocurrency loans, let’s briefly review the basics of how crypto is taxed.

In the United States, cryptocurrency is subject to capital gains and ordinary income tax.

Capital gains tax: When you dispose of crypto, you’ll incur a capital gain or loss depending on how the price of your crypto has changed since you originally acquired it. Examples of disposals include selling your crypto, crypto-to-crypto trades, and using your crypto to make a purchase.

Ordinary income tax: When you earn cryptocurrency, you’ll recognize ordinary income based on the fair market value of your crypto at the time of receipt. Examples of earning cryptocurrency include staking rewards, mining rewards, airdrop rewards and receiving crypto as part or all of your paycheck.

Looking to estimate your crypto tax bill? Check out CoinLedger’s free crypto tax calculator.

What are the tax advantages of cryptocurrency loans?


Often, investors in need of fiat currency will sell off some of their existing crypto holdings. However, it’s important to note that “disposing” of your cryptocurrency has tax implications.

As previously mentioned, if you sell or trade your crypto assets, you’ll incur a capital gain or loss depending on how the value of your assets have changed since you purchased or acquired them.

  1. Charlie buys $1,000 of Bitcoin.
  2. Years later, Charlie sells his BTC for $10,000.
  3. Charlie incurs $9,000 of capital gain.
Capital Gains on Bitcoin SALT

How crypto loans can help you save money…

Unlike disposals, loans from centralized entities like SALT Lending are considered non-taxable because rather than spending your Bitcoin or other crypto assets, you’re using them as collateral to secure a cash or stablecoin loan. It’s similar to getting a loan against your car, house, or 401K in that you’re borrowing against assets you already own

Plus, if you’re long on crypto, meaning you believe the value of your assets will appreciate over time, a crypto-backed loan is an excellent way to get value out of your crypto assets right now without having to sell them or lose out on potential gains. By collateralizing your crypto with SALT, you can get cash in 48 hours or less and get your assets back as soon as you’ve paid off your loan in full.

How are DeFi loans taxed?

Unfortunately, many of the tax advantages of crypto loans don’t apply to the DeFi space.

Many DeFi lenders use crypto-to-crypto swaps to facilitate loans. In the past, the IRS has classified these types of transactions as disposal events subject to capital gains tax. As a result, it’s reasonable to assume that taking out a DeFi loan will be considered taxable in some situations.

In addition, DeFi lenders often automatically liquidate your holdings if their value falls below a certain threshold. Even if you don’t receive the proceeds of the liquidation, you’ll still be subject to capital gains tax.

Can I deduct interest payments from my taxes?


The interest payments on your cryptocurrency loans may be tax deductible in some scenarios.

Personal Loans: Non-Deductible

When you take out loans for personal reasons — such as for groceries, car payments, or tuition — your interest payments are considered non-deductible.

Investment Loans: Deductible

Loans taken out for investment purposes can be tax-deductible. If you took out a loan and re-allocated your funds to other investments, you can deduct your interest payments up to your net investment income for the year. This includes your total income from investments including capital gains from stocks and crypto, dividends, and interest.

Business Loans: Deductible

If you take out a loan as a business entity, you can deduct the cost of interest payments as a business expense.

Types of crypto loans with deductible interest

How are liquidations taxed?

SALT Lending takes steps to ensure that its customers’ funds are protected from total liquidation even in the case of a severe market downturn. If the value of your cryptocurrency begins to collapse, SALT Stabilization will convert your entire collateral portfolio to stablecoin to protect the value of your holdings.

It’s important to remember that converting cryptocurrency to stablecoin is considered a crypto-to-crypto trade subject to capital gains tax based on how the price of your collateral has changed since you originally received it.

In conclusion


While cryptocurrency disposals can lead to an expensive tax bill, crypto-backed loans are tax-free. That’s part of the reason thousands of investors use SALT Lending to take out loans against their Bitcoin, Ether, Litecoin, Bitcoin Cash , and other cryptocurrencies.

Take the Guesswork Out Of Crypto Taxes


Cryptocurrency tax reporting is a challenge for investors all over the world. By taking the right steps to track your transactions and legally reduce your tax liability, you can save yourself thousands of dollars as well as hours of stress during the tax season.

Whether it’s tracking your capital gains from buys, sells, or NFT mints, CoinLedger makes the process of doing your crypto taxes simple. Visit CoinLedger.io to learn more about how you can manage your crypto taxes in one place, and even import your tax filing information into TurboTax and other leading tax software platforms.

Sign up now for a free preview of your capital gains and losses!

For a limited time only, any SALT Lending customer can get 20% off of their next CoinLedger tax report with the discount code SALTLEND.

Sanctions on Tornado Cash: What You Need to Know

On August 8, 2022, the U.S. Department of the Treasury’s Office of Foreign Asset Control (OFAC) sanctioned the virtual currency mixer Tornado Cash. OFAC states that Tornado Cash “has been used to launder more than $7 billion worth of virtual currency since its creation in 2019. This includes over $455 million stolen by the Lazarus Group, a Democratic People’s Republic of Korea (DPRK) state-sponsored hacking group that was sanctioned by the U.S. in 2019, in the largest known virtual currency heist to date. Tornado Cash was subsequently used to launder more than $96 million of malicious cyber actors’ funds derived from the June 24, 2022 Harmony Bridge Heist, and at least $7.8 million from the August 2, 2022 Nomad Heist.”

OFAC released subsequent guidance on September 13, 2022 explaining that U.S. residents and citizens can apply for a license to recover legitimate funds that may be tied up as a result of the sanction. Specifically, the OFAC guidance states:

For transactions involving Tornado Cash that were initiated prior to its designation on August 8, 2022 but not completed by the date of designation, U.S. persons or persons conducting transactions within U.S. jurisdiction may request a specific license from OFAC to engage in transactions involving the subject virtual currency.  U.S. persons should be prepared to provide, at a minimum, all relevant information regarding these transactions with Tornado Cash, including the wallet addresses for the remitter and beneficiary, transaction hashes, the date and time of the transaction(s), as well as the amount(s) of virtual currency.  OFAC would have a favorable licensing policy towards such applications, provided that the transaction did not involve other sanctionable conduct.

In order to apply for a specific license to complete a transaction or withdraw virtual currency involving Tornado Cash that was deposited prior to its designation, or to engage in other transactions or dealings with Tornado Cash, you are encouraged to file a licensing request by visiting the following link: https://home.treasury.gov/policy-issues/financial-sanctions/ofac-license-application-page.

Additionally, OFAC is aware that certain U.S. persons may have been dusting victims and received unsolicited and nominal amounts of virtual currency or other virtual assets from Tornado Cash. OFAC advises that its sanctions regulations do apply to dusting transactions and should be blocked and reported to OFAC within 10 days. To file a report, complete the form available at this link and email to OFAC’s Sanctions Compliance and Evaluation Division at [email protected]

We've previously written about protecting yourself from dusting attacks.

SALT Blockchain Inc., SALT Lending LLC, SALT Platform LLC and its employees operate in compliance with all applicable U.S. federal and state laws, including with respect to laws governing money laundering and anti-terrorism. SALT reserves the right to decline to open an account if, after conducting its compliance review, SALT determines it risks noncompliance with money laundering and anti-terrorism requirements.

We’re excited to announce a potential acquisition by Bnk To The Future

We are excited to share a recent announcement in connection with our strategic partner Bnk To The Future (“BF”). We are exploring a potential acquisition and want you to have the background. BF has entered into a letter of intent to acquire SALT, contingent upon signing definitive agreements and regulatory approval.

This potential union will combine SALT, the world's first crypto lending platform, with BF, the world’s first Bitcoin and crypto securities business. Moving forward with this acquisition provides an opportunity to enhance our suite of products and advance our mission to preserve and grow your crypto wealth. 

What this means for you & your loan:

We want to assure you that there will be no changes to your loan as a result of this announcement. Read the full press release here.

To keep up to date, follow us on Twitter where we will post links for an upcoming shared Twitter Spaces and YouTube Live session with Bnk To The Future.

Please feel free to reach out to our loan support team with any questions you may have at loansupport at saltlending.com.

Finance Strategists: Interview with CEO of SALT Justin English

Introduction

Success leaves clues.

Finance Strategists sat down with Justin English, CEO of SALT Lending. He shared his thoughts on the past, present, and future of the company, as well as the insight he has gained from running the business.

Who is Justin English?

Q. Who are you and what’s your background?

I’m Justin English. I joined SALT as CEO in May 2020. Prior to my role as CEO, I was first and foremost an early customer and investor in SALT and began consulting for the company and serving on its board in fall of 2019.

Before joining SALT and entering the crypto space, I spent more than 15 years across the private equity, early stage venture capital, consumer products, supply chain, manufacturing, distribution, and consumer services industries.

An entrepreneur at heart, I’ve been personally invested with capital and have spent my career understanding business drivers to influence implementation in the real world, which has aided me in my ability to serve as an advisor to early-stage organizations as well as those that are growing and scaling.

Q. Who has been your biggest influence, and why did they have such a significant effect on you?

My college economics professor had a significant impact on my ability to think critically and bring insight into a discussion. Before each class, we were all expected to read The Economist and be prepared to discuss that week’s issue of the magazine. Our entire grade was based on these discussions and the insights we produced throughout them.

The exercise taught me to pay close attention to the nuances of the story or issue being discussed and formulate intelligent, thought-provoking questions as a result. I learned to identify the most common assumptions on which people would base the discussion and then question and poke holes in those assumptions. I’ve leaned on this tactic throughout my career and still use it today, as it always makes people stop and think, resulting in a more insightful discussion overall.

Q. Knowing what you know now, what advice would you have given your younger self?

I was extremely stubborn when I was younger and set on learning in my own way, through my own failures. If I could give one piece of advice to my younger self, it would be to use my resources and learn from the achievements and failures of those who came before me rather than repeat their mistakes and failures purely out of stubbornness.

Business

Q. What is SALT Lending?

SALT is a fintech company with a focus on crypto assets. Our mission is to build products that increase access to financial opportunities and give people more control over their ability to generate long-term wealth.

The first to offer crypto-backed lending, we accept crypto assets as collateral for cash loans, enabling crypto holders to get value out of their assets without having to sell or rely on the traditional banking system.

Aside from our lending product, we are excited about the upcoming launch of the SALT Card — a crypto-backed credit card that will allow customers to borrow against their crypto assets and use their crypto for everyday purchases without having to spend any of it, all while earning crypto rewards with every purchase.

Q. What makes SALT Lending different from its competitors?

SALT is different from our competitors in three key areas: the combined experience within our team enables us to continuously improve operational processes and make space for innovation; our management team and our ability to build and invest in value-creating technology (SALT Stabilization, StackWise, our Loan Management System, trading execution platform); and the fact that we’re leaning into transparency and compliance and have been a publicly reporting company since early 2021.

From a customer perspective, we often stand out for our customer service, as SALT customers love knowing that at any point, they can speak to a real person who can walk them through any issues they’re experiencing or answer any questions they may have.

Q. What led you to join SALT Lending?

Having started as an early investor and SALT customer back in 2017, I was among the first to ever hold a crypto-backed loan and explore SALT’s platform. I experienced the benefits and pain points of the product first-hand and later joined the Board of Directors, which enabled me to provide feedback on the technology and product offerings and offer guidance on what improvements could be made.

I continued to be a customer throughout my engagement with SALT and took on the role of CEO in 2020 with the intent to improve our lending product and expand our product suite to provide greater value for our customers.

Since becoming CEO at SALT, my goal has been to create products that incentivize people to develop strong financial habits that will enable them to build generational wealth– the SALT Card is the first manifestation of this goal, as we seek to take the traditional concept of credit and disrupt it.

With this product and future products, we want to change the way people think about debt and credit and empower them to move from building up “bad debt” to generating wealth simply by developing better habits and getting more value out of the assets they already own.

Q. What has the experience of building the business taught you?

While I’ve learned a lot from building the business at SALT, some of the greatest things the journey has taught me are leadership and softer skills, which I’ve come to realize are way more important than I’ve previously given them credit for.

Aside from that, I’ve learned the importance of pragmatism when it comes to making business decisions. I’ve seen so many peers fall into the trap of becoming too emotionally invested in something to the extent that the sunk cost bias clouds their judgment and creates a tunnel vision mindset.

I’ve always been a pragmatic person, but my experience as an entrepreneur and my current role as CEO at SALT have helped hone my ability to compartmentalize and look at things from different angles. I make a conscious effort to take a step back and look at problems from a really plain, simplistic view.

For me sunk cost equates to learning, not failure. In leading a business I’ve learned that when it comes to problem-solving and decision-making, you have to invest time and energy and take note of the process and the journey as you go along.

With this mindset, I’m able to emotionally detach from the investment itself and look at it not as a sunk cost, but as a necessary process that has enabled me to make more informed, objective, and sound decisions.

Q. Where do you see things headed for you and the company in the next five years?

As crypto becomes more widely adopted and emerging businesses continue to challenge the traditional financial system, we want to help consumers achieve financial freedom by shifting the way they think about credit and wealth.

The traditional system does not set consumers up for financial success. In fact, it does the opposite, as it is structured in such a way that encourages the accumulation of “bad debt” and borrowing against future income to enable living outside of one’s means.

Once consumers fall into this trap, it’s extremely hard for them to get out of it and it becomes cyclical. We want to fundamentally change the way people think about their finances by educating them and building products like the SALT Card that incentivize good habits like saving and building generational wealth.

Note: This article was originally published on Finance Strategists.

The Evolution of Money

Entrepreneur Jim Rohn famously mused, “Time is more valuable than money. You can get more money, but you cannot get more time.” Mr. Rohn may have been more right than he knew because while time has infinite value, money, by itself, has none. Whether you’re holding a dollar, a franc, some yen, a metal coin, or a seashell, it has no value—not until someone wants it. This goes for anything that can be traded, but the reality is far harsher when it comes to the paper people carry in their wallets in the hopes of exchanging it for goods and services. At the same time, money is, in some ways, an important block in the foundation of modern society. Why? Let’s take a closer look at the evolution of money to find the answers.

A brief history of money

Bartering
Before people carried around pieces of paper that symbolized value, they would trade goods and services with each other to make transactions. Each possession had a relative value. This means that what it meant to the holder was not necessarily equal to what it meant to the person to whom they wanted to give it in exchange for something else.

Take, for example, a farmer who grew potatoes but needed tomatoes. The farmer may approach his friend who grew tomatoes and offer him 10 potatoes for 10 tomatoes. The friend may say, “Well, to part with these 10 tomatoes, I’m going to need 15 potatoes.” If the potato farmer agreed and had that many potatoes to barter, he would present them, make the exchange, and both parties would leave the transaction satisfied.

On the other hand, if the potato farmer approached a different farmer with the same proposition, the transaction may not go as planned. If the second farmer already grew potatoes, he may ask for something else. It could be corn, beets, or another type of produce. But the other farmer may also prefer a tool or some form of service from the potato farmer. Each transaction was, therefore, relative. Currencies, although abstractions of value, brought concreteness to previously relative transactions. One of the progenitors of modern currency was salt.

Salt
Salt itself used to be a currency (fun fact: this is how we got our name). Far more than a common seasoning, salt has been at the center of trade and culture for multiple millennia—to the point where the word “salt” is at the root of the word “salary.” Salt, as a flavor additive, has long been a valued commodity. The word “salad” comes from when the early Romans used to add salt to vegetables and leafy greens.

Before the large mass-production of salt became commonplace, the production of salt was a time-consuming process. And as people figured out different ways of producing it, its production was limited to maintain its value. Therefore, people with a salt surplus had a coveted commodity.

The Egyptians used to use it as part of their religious offerings. This lead to salt becoming the currency of choice while trading with the Phoenicians. The practice continued for many centuries and spread across much of the developed world. Marco Polo, while traveling through China in the 11th century C.E., noted how the Chinese used to boil water to create a salt paste that, when formed into a cake, was worth two pence.

Bronze castings
As time progressed, around 770 B.C.E. the Chinese began developing bronze representations of the things they were trading. For example, if a farmer wanted to trade a hoe for a hammer, he would present a bronze casting of a hoe and give it to a carpenter—or someone else—in exchange for a small bronze hammer. The bronze statue could then be exchanged for the real thing. This solved the problem of having to physically transport large or cumbersome objects to places of trade.

Coins
Soon, it became more practical to use coins instead of little castings of valued objects. This approach maintained the convenience of being able to carry an item in your pocket and added an extra convenience: the ability to easily manufacture them.

The manufacturing of money was first performed in Lydia, which is now in the west of Turkey. This was the first mint. Inside, people manufactured coins that represented value. Around 600 B.C.E., Lydia’s ruler, King Alyattes, made the first official state currency. The coins were manufactured using electrum, which consists of a naturally-occurring combination of silver and gold. Each coin was stamped with a picture, and each picture represented a different value. Thus was born the concept of denominations. This system of minting denominated money helped facilitate a more efficient trading system, propelling Lydia to being a powerful, wealthy empire.

Paper
The Chinese made the switch to paper currency around 700 B.C.E. The distribution and use of the bills were carefully regulated by the emperor. In fact, on the bills, there was an inscription warning people that if they counterfeited the money, they would, literally, lose their heads.

After some time, banks began adopting the use of paper money. Inside the bank would be an amount of gold that corresponded to paper money the bank could issue to individuals with whom they did business. For example, if someone deposited half a pound, or eight ounces, of gold, at the bank today, according to the rates at the time of this writing, it would give them $15,197.60. The person would then be able to use that paper to purchase goods and services.

If the individual went and bought a new horse, perhaps spending $8,000 of his money, the person who sold the horse could take that paper money to the bank. The bank would then give the horse-seller $8,000 worth of gold. This gave birth to the modern concept of money, with gold as the underlying asset of value.

Currency-based conflicts
As more countries adopted the use of currency, some took advantage of the, admittedly arbitrary, value of money. They would do things that would cause the value of another country’s currency to rise. On the surface, this may sound like a good thing. However, when a currency is inflated, the cost of the goods within the country goes up. This inflation is due to the fact that more work has to be performed to produce the goods being traded. If someone were to do the same amount of work they did before the currency was inflated, they wouldn’t get paid enough to cover their bills. With goods that cost too much, a country wouldn’t be able to trade with others that could help them build the weapons and armies they needed to engage in war. Currency battles for the sake of weakening another nation continue to this day.

Credit cards
Similar to how going from bronze castings to coins made transactions easier, going from paper to credit cards made buying and selling more convenient for 20th-century consumers. With a credit card transaction, the money of the individual is still held within a bank, but the credit card is used to make the transfer. This is made possible due to two concepts: fungibility and transferability.

When a unit of value is fungible, it has the same value as another unit with the same denomination. For instance, a $10 bill in Boston has the same value as a $10 bill in Los Angeles. And the same goes for an electronic transaction that provides access to $10 stored in a bank. Thanks to fungibility, an individual can put $1,000 into a bank and get a credit card that has a $1,000 spending limit. The transferability of money refers to the fact that money can be moved from one party to another. In a credit card transaction, this happens electronically.

The bank that supports a credit card transaction can also allow the person to spend more than they actually have by lending the individual money. The conditions of the loan agreement are contained within the credit card contract. In many cases, the individual may not have enough money in the bank to cover the transaction. Therefore, they agree to put at least that much, and often a percentage more, into the bank in exchange for the right to spend the money the bank lent them. The use of debit and credit cards and the process behind credit card payments are pivotal factors in the evolution of money. They set the stage for a crucial monetary concept: electronic payments.

Electronic payments
Electronic payments are at the heart of the culmination of the evolution of money. In many ways, electronic payments solve the original problem money sought to tackle more efficiently. When money was first conceived, it’s creators were trying to create an abstraction of value that was fungible, transferable, and easy to spend and accept. With credit and debit card payments, electronic transactions become commonplace while providing a solution for everything money was meant to be.

However, one problem still remained: the middleman. If you have someone working as a go-between that generates wealth by charging you to spend money electronically, how can you guarantee a transparent, trust-worthy, error-free, corruption-free transaction?

Enter cryptocurrency. With the onset of bitcoin, cryptocurrency became an efficient way to both provide an electronic, tradable abstraction of value and, once again, provide the world with a one-to-one, two-person transaction, devoid of a middleman. But the crypto movement wasn’t arbitrary. The signs have been there for years.

The historical signposts that pointed to cryptocurrency

Because cryptocurrency is such an innovative idea, it’s easy to lose track of the fact that it was born, not so much out of innovation but out of necessity. The modern monetary system has, in many ways, been broken for quite some time. For many decades, there have been signs pointing to the need for a better solution.

Interest rate manipulation
Perhaps one of the most powerful historic indicators of the need for an alternative to typical fiat currency was revealed in the 1970s. The interest rates, designed to help stabilize the United States economy, ended up doing the exact opposite. When the government manipulated interest rates to help slow the inflation of common goods, it ended up having the opposite effect. Inflation skyrocketed as certain goods saw huge leaps in their prices. While some people could afford to pay the higher costs, others couldn’t and had to go without essential items.

Even though companies selling their goods to other Americans during a period of inflation may benefit, those exporting American-made goods suffer. Because it costs more to produce goods in the United States, companies have to charge buyers from other countries more. Consequently, some goods become unaffordable for international buyers and they look to other countries to get what they need. This impacts the gross domestic product (GDP) of the country suffering from inflation, hurting their overall standard of living. Because the government can choose to print money anytime it wants, regardless of whether or not there’s enough gold to support the printed currency, inflation in the modern system can easily spin out of control. As in the 1970s, it can start with a poorly adjusted interest rate and have global implications.

With cryptocurrency, the supply of each token is either limited or controlled by the currency’s governance team—a group of individuals and token-holders who make decisions using a voting system. This helps control the inflation of each cryptocurrency. Also, because the currency isn’t hindered by national borders, you have one common means of purchasing goods and services, and its value is the same regardless of where you are.

The housing crisis
The financial crisis of 2007 was another bellwether for the global economy because it highlighted the corruption that can occur when you have profit-hungry “middlemen” involved in transactions. When someone wants to buy a home, they often have to get a loan from a bank. The bank decides who they will lend the money to, as well as how much they will make that person pay, in interest, for the right to use that money. In theory, the system makes sense. However, as the world saw in 2007, when the banks, hungry for profits, abuse the system and those involved, it can have far-reaching implications.

If the interest rate at which money is lent isn’t decided by a bank but by mathematical equations that take into account real supply and demand factors, the lenders can only earn more by lending more. Manipulating interest rates for the bank’s bottom line would be a thing of the past. Cryptocurrency also addresses the problem of predatory lending. The economic crash was partially a result of banks lending money they knew couldn’t be repaid—and then selling the problematic loan to another, unsuspecting, bank. When transactions happen between two people instead of three, the middleman, and his potentially greedy ambitions, are removed. Cryptocurrency, therefore, eliminates some of the major causes of the financial crisis of 2007.

SALT Lending: A historical turning point in the evolution of money

Throughout history, the utility, divisibility, verifiability, and fungibility of salt made it a perfect asset to be used as a method of trade and currency around the world. Through the products and services at SALT, the legacy continues. SALT is now bridging the gap between cryptocurrencies and traditional lending.

Even though cryptocurrencies are, in many ways, a superior monetary solution, they are still not yet widely accepted. With SALT, holders of crypto can get loans using their digital assets as collateral. You can then spend the USD or stablecoin you get any way you’d like. SALT empowers those in the cryptoverse, allowing them to turn the most innovative monetary solution since, well, salt, into liquid assets.

The Stable Makeup of Stablecoin

In 2008, Satoshi Nakamoto released the Bitcoin white paper, introducing the concept of a decentralized currency to the public. From that time on, many have turned to cryptocurrency for an alternative to traditional fiat currencies that offers decentralization, transparency of exchange, and ease of use—especially when it comes to international exchanges.

However, along with the plaudits have come disadvantages, notably the volatility of digital assets relative to the US Dollar. The perceived value of a specific cryptocurrency by investors can lead to wide fluctuations in the value of Bitcoin, Ether, and other types of crypto. This, in turn, can make cryptocurrency more difficult to use as a medium of exchange or store of value.

Enter stablecoins, an inherently less volatile option being considered the best of many worlds. They provide a desirable link between the stability of fiat currency and the decentralization and efficiency of cryptocurrency.

What are stablecoins and where did they come from?

Stablecoin is a catch-all phrase for cryptocurrency that is pegged to specific reserves or other asset types. More specifically, stablecoin is divided into four groups:

The first stablecoins, BitUSD, and NuBits, came online in 2014 and were collateralized through various other cryptocurrencies. Also released in 2014 was RealCoin (now Tether), the first crypto to be backed by so-called “real” assets. Active dollar-based stablecoins today include Paxos Standard, TrueUSD, USD Coin, Tether USD, and Gemini Dollar.

How to use stablecoin for a crypto-backed loan

Though it might not be a strong addition to an investment portfolio, stablecoins are useful in many ways. For example, at SALT Lending, as a provider of crypto-backed loans, we accept stablecoins for:

SALT also offers loan payouts via stablecoin or fiat currency. The advantage of a stablecoin payout is that only a stablecoin address is required, no bank account is needed.

The potential of stablecoins

Cryptocurrency enthusiasts see value in stablecoins given their decentralized properties, ability to facilitate better payment rails for global commerce, accessibility in unbanked jurisdictions, and programmability to streamline business operations.

Meanwhile, more traditional institutions are researching stablecoins for their potential in cross-border lending and overseas transactions without conversion into fiat, or sovereign currency. The Bank of Canada mentioned the use of stablecoin in its 2020 vision, focusing on it as a part of emerging payment technologies. Meanwhile, The U.S. Office of the Comptroller of the Currency released guidance indicating that national banks are free to hold reserve currencies for stablecoin.

While much of the world continues to rely on fiat currency for financial operations, digital currencies have been quickly disrupting this archaic financial infrastructure. Of those currencies, stablecoins could bridge the divide between cryptocurrency volatility, decentralized ownership, and providing banking solutions in otherwise untouched jurisdictions.

For more information about cryptocurrency loans and stablecoins, contact SALT Lending.

How to use a crypto-backed loan

If you need access to a loan, you’re probably considering the lineup of traditional options like credit cards, personal loans, business loans, and home equity options. They all base your ability to borrow off of your income, credit, and possibly your assets. But one option that isn’t as widely-talked about is a crypto-backed loan. It’s a new way to borrow that doesn’t factor in your credit and income as no personal guarantee is required. Instead, it’s a loan simply secured by your crypto assets. So how can you use a crypto-backed loan from lenders like SALT?

10 ways to use a crypto-backed loan

1. Pay off credit card debt

Credit cards have a place in our economy and can help you rack up rewards, but with interest rates up to 29%, they aren’t typically the best option for carrying balances. Crypto-backed loans, on the other hand, give borrowers a flexible way to access lump sums of cash with interest rates starting as low as 5.95%.

If you have crypto, you can get a crypto-backed loan and use the proceeds to pay off high-interest credit card balances, consolidating them into one payment and potentially lowering your cumulative interest rate.

2. Make a large purchase

Whether you’ve been planning to make a purchase for a while, or an emergency popped up and took you by surprise, the proceeds of a crypto-backed loan can help you cover it. For example, say you want to take a family vacation to Hawaii. Instead of putting the flight and all the trip expenses on a credit card, you can take out a crypto-backed loan and then pay for everything in cash. This can help you avoid higher interest rates and any negative impact on your credit score.

3. Home renovations and improvement projects

From a burst water pipe to an unexpected HVAC repair, homeownership can be expensive. While it’s advised to have a rainy-day fund just for these occasions, even the best savers may find the final bill just out of reach. You may also feel reluctant to drain your emergency savings account to put your house back in order. A crypto-backed loan can quickly get you the cash you need.

4. Paying off medical debt

If you’re still opening bills every month thanks to that one time you broke your arm ten years ago, you are not alone. About 32% of American workers have medical debt and more than half have defaulted on it. Medical debt can be crippling to an otherwise healthy budget, and with payments lower than with other types of financing, it can take years and years to pay off.

A crypto-backed loan may be just what you need to get that hospital or clinic to stop calling, and it’s often much cheaper than putting all of that debt on credit cards. Further, if your personal credit is maxed out, a crypto-backed loan can open up a new avenue of borrowing for you.

5. Planning a wedding

Even if you don’t want to spend too much on your big day, the average wedding in the US costs just shy of $40,000. From the dress and the venue to the flowers and catering, many expenses add up. Temporarily trading your crypto for cash can help you cover the big day without digging into savings or driving up your credit utilization. Cash payments to vendors can also sometimes get you a discount on services, giving you yet another reason to consider grabbing that crypto-backed loan before saying, “I do.”

6. Buying a house or real estate

Have you considered buying a property outright without the hassle or extra fees of a mortgage? A crypto-backed loan may be just the ticket to closing on that house deal. You’ll also be at an advantage as a cash buyer in an increasingly tight housing market; the seller may be more than happy to give you the deal since there are no additional lender hoops for either party to jump through. Cash obtained from a SALT loan is also free of those “extra” charges, such as loan origination fees.

7. Starting a business

Even the simplest online businesses have startup costs. A crypto-backed loan can help pay for the costs like forming an LLC, building a website, and getting your first product manufactured. Don’t let another year pass with the excuse that you just don’t have the funds. If you have crypto assets, this can be the year you get your dream business going.

8. Upgrading mining equipment for mining operations or individual miners

Crypto miners have to evolve to survive, and that means investing in the latest, most powerful equipment. Being that you’re already involved in the crypto sphere, crypto-backed loans are a natural choice that can help you stay competitive and get every coin you can. Plus, it’s an investment that can help you not only pay off your loan and get your crypto back but also earn more.

9. Fund ongoing operational business costs

While new businesses benefit from getting a funding jump-start, existing companies can often use a little extra cash flow too. Whether you want to hire new employees, invest in marketing, expand your product offerings, or something else, business owners of all types are turning to crypto-backed loans to diversify their borrowing and take advantage of low rates through short-term loans.

10. Reinvest or trade crypto

Serious crypto investors often need fiat to acquire more crypto. A crypto-backed loan that gives them access to cash can help them do so. With the crypto markets showing promise, and the rates on SALT loans very low, it’s easy to see how smart investors can make the numbers work in their favor to expand their crypto enterprises.

SALT crypto-backed loans: Flexible funds with no personal guarantee

Whether you only need a few thousand dollars or a large lump sum, SALT loans can give you access to $5,000 or more in USD or Stablecoin. Secure your loan easily, with a single crypto asset, or through a combination of SALT-approved currencies. You’ll always know how your assets are doing, as SALT’s secure system and unparalleled customer support ensure that you can check in on your assets at any time. There’s no credit check needed, either. Once you deposit your collateral assets onto the SALT platform, you’ll be well on your way to getting the cash you need for whatever move you want to make.

Introducing SALT Connected Accounts - UPDATED (August 25, 2021)

UPDATE: Due to the fact that Zabo has joined Coinbase, they are shutting down the API for connected accounts, meaning we will no longer be able to offer this feature.

Want to see all of your crypto assets in one place?

Now you can with SALT Connected Accounts.

This new feature allows you to add your external accounts and wallet addresses to track all of your crypto assets right from the SALT app.

With a holistic view of your assets, you can manage your loan more intelligently than ever.


Get Started with SALT Connected Accounts

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Disclaimer: Link your cryptocurrency account via read-only API access or blockchain address tracking. Account data is for informational purposes only and will not constitute loan collateral.

SALT announces the SALT Card

Waitlist now open for the first crypto-backed credit card designed to help you HODL.

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Today we announced our concept for the SALT Card, the first crypto credit card that lets you use your crypto to buy anything — from large purchases like vacations to everyday purchases like coffee and groceries– without selling or spending any of your crypto. Unlike other cards on the market that encourage you to spend your crypto, the SALT Card is designed to help you HODL and stack sats by earning bitcoin rewards on every purchase. No credit check required.

Already sold on the concept? Join our waitlist to stay in the know or keep reading to learn more.


How will the SALT Card work?

With the SALT Card, your crypto is your credit. This means we won’t ask for your credit score or do a credit check because your digital assets (not your credit score) will secure your line of credit and determine your credit limit.

We designed it this way because we know you want to get the most out of your crypto assets without having to sell them.

How is it different from a crypto-backed loan?

While the SALT Card is secured by your crypto assets, it’s different from a crypto-backed loan in that you can choose to borrow only what you need, and you only pay interest on an existing balance. Like a traditional credit card, if you pay the balance off each month, you won’t owe any interest. Plus, by having a physical SALT Card, you will be able to use it in the same places and for the same purposes as the other credit cards in your wallet.

What makes the SALT Card stand out?

Here are just a few of the existing benefits. We’re still in the early stages of developing the card and are currently in search of a card partner.

Once we have a partner on board, we will be able to finalize the card rewards and any additional benefits. In the meantime, we’d love to hear your input on what you value most in a crypto credit card.

We’re excited to be launching a new product and hope you’ll join our waitlist to receive the latest updates in the development of the SALT Card.

If you are connected to a major credit card partner and are interested in working together, please contact [email protected] We’d love to hear from you and explore opportunities.

Disclaimer: By joining the waitlist you agree to receive marketing communications from SALT. The waitlist does not guarantee that you will receive a SALT Card. SALT Card will be subject to eligibility requirements, including geographic and suitability limitations. Fees and terms are not final and are subject to change at any time in SALT’s sole discretion.

Update regarding our supported collateral types

Effective May 25, 2021, we will no longer accept Dash and Doge as collateral for new crypto-backed loans, nor will we support future deposits of these collateral types, but for those who already have Doge and Dash on our platform, we will continue to support and monitor your collateral. Withdrawals will continue to be available as usual for anyone who currently has Doge or Dash on our platform.

We are constantly evaluating our current collateral types and considering new ones based on market conditions and other parameters. Given Doge and Dash do not meet our current collateral requirements, it is necessary for us to remove them from the platform at this time. While we are sad to say goodbye, it doesn’t mean it’s goodbye forever. And who knows? Between Elon’s tweets and Coinbase’s decision to list Doge, maybe one of these collateral types will be back before you know it. Only time (and market conditions) will tell.

In the meantime, we continue to support many beloved cryptocurrencies as collateral for crypto-backed loans including BTC, ETH, LTC, BCH, PAX, PAXG, USDC, TUSD and SALT.

Want to be kept in the loop regarding announcements and products releases?