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ARTICLE · 01 DECEMBER 2022

Can I Deduct Cryptocurrency Losses?

Freeman Law
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Can digital asset or cryptocurrency investors that were customers or account holders in a failed cryptocurrency business claim a deduction for their digital asset or cryptocurrency loss?

United StatesTax
Andrew Mirisis
Andrew Mirisis

Claiming Cryptocurrency Losses as Tax Deductions

Introduction: Crypto Bankruptcies, Custodial Accounts, Misappropriation, Hacks, and Theft

Can digital asset or cryptocurrency investors that were customers or account holders in a failed cryptocurrency business claim a deduction for their digital asset or cryptocurrency loss? So far this year there have been four notable crypto bankruptcies: (i) Celsius Network, (ii) Three Arrows Capital, (iii) Voyager Digital, and (iv) FTX and FTX.US. These crypto bankruptcies left their investors and customers with large economic losses. The primary reasons for the cryptocurrency losses were because (i) the digital asset the customer held in the account abruptly and significantly dropped in value as a result of events that precipitated the bankruptcy, or (ii) the customer's custodially held assets disappeared through misappropriation, hacking of the platform, or were simply unaccounted for. Cryptocurrency investors and customers

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