Non-taxable Crypto to Crypto swaps

Cryptocurrency taxation is evolving, and some countries don't tax crypto<>crypto swaps, but do tax crypto<>fiat swaps. This can get a little tricky, but Awaken will handle all of that complexity for you.

Some countries that allow non-taxable crypto<>crypto swaps are:

If your country isn't on this list but believe there may be non-taxable crypto<>crypto swaps, send us an email letting us know team@awaken.tax.

Below we'll walk through a couple examples of how Awaken handles making crypto<>crypto swaps non-taxable.

Crypto to NFT swaps are non-taxable (with the exception of Italy above) and will look something like the below.

For NFT buys, we'll take the cost basis of your SOL (whatever you purchased it for) and transfer the price to the NFT. So the price of the NFT is rooted in what you paid for SOL (not in the current price of SOL).

Example NFT Sale:

For an NFT sale, we'll transfer the cost basis of the NFT to the SOL. So if you bought your NFT for $1,000 cost basis SOL. The NFT would have a basis of $1,000. And then that cost basis would be transferred to the SOL when you finally sell the NFT (or ETH, etc). Note: this can mean that the cost basis of the SOL you received is below market value (in the below example SOL could have a current price of $200, but the basis is only $97). This means that when you finally sell for fiat, all the gains will be realized at that point.

For swapping between two cryptocurrencies, we will transfer the cost basis. So whatever the cost basis of the sent token is (below this is DRIFT) we will transfer to the SOL. This means that there will be no capital gains/loss on the transaction, and in the future when you sell the crypto for a fiat currency (like EUR or USD) it'll realize the full capital gain or loss at that time.

When you finally sell your cryptocurrency for fiat, the capital gains/losses will be realized at that point.

If you bought SOL for $100, traded it all the way up to $1,000 onchain (but have no capital gain / losses). When you finally transfer it to sell to fiat your cost basis will still be $100. So when you sell it for $1,000 of USD, you'll have a $900 gain at that point. And similarly if you have losses, they will be realized at that point as well.

Automating crypto<>crypto transactions can be tough, so there are a few gotchas below you might want to look out for.

Solana can often give you small bits of SOL (or cost small bits of SOL) for rent. Sometimes rent can throw off transaction, and you may need to edit the transaction to remove the gains/loss.

For complicated DeFi where a transaction does multiple things, in order to get the tax events to go away you may need to look at this guide.

If you swap $100 cost basis of SOL for 10,000 USDC, the USDC will have a cost basis of $100 (even though it is worth $10,000). This is normal, and needs to stay that way so when you finally swap to fiat we can realize the capital gains/losses for that $10,000.

And that's it! If you have any questions, just contact support and we'd be happy to answer them. Thanks for being an Awaken user.