Question 1

What happens to my collateral when I repay a crypto-backed loan?

Accepted Answer

Your collateral is typically returned to you in full once you repay the loan principal and any accrued interest. The assets remain yours throughout the loan term. They are simply held by the lender as security.

Question 2

Can I get a cryptocurrency loan without putting up collateral?

Accepted Answer

Uncollateralized crypto loans exist but are rare. Uncollateralized loans typically require a strong credit history, institutional relationships, or participation in specific DeFi protocols with reputation-based systems. The vast majority of cryptocurrency lending requires over-collateralization.

Question 3

Are crypto-backed loans taxable in the United States?

Accepted Answer

Borrowing against digital assets generally does not trigger a taxable event because you are not selling the asset. However, interest payments and other factors may have tax implications. If your collateral is liquidated, that event could be treated as a sale and may trigger capital gains taxes. Consulting a tax professional for advice on your specific situation is worth considering.

Question 4

What types of cryptocurrency can I use as collateral for a loan?

Accepted Answer

Accepted collateral varies by platform, but Bitcoin and Ethereum are the most commonly accepted due to their liquidity and market capitalization. Some platforms, including Figure, also accept Solana. Other lenders may accept stablecoins and a wider range of altcoins, though terms may vary based on the asset's volatility.

What is crypto lending and how does it work?

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What is crypto lending and how does it work?

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