Cryptocurrency Archives

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Over the past few years, cryptocurrency has exploded in popularity. In the military community, people now regularly ask about related investing strategies. As a result, we’ll use this article to explain several different options for how to invest in cryptocurrency.

Specifically, we’ll discuss the following:

What is Cryptocurrency?
Directly Investing in Cryptocurrency
Indirectly Investing with Cryptocurrency Stocks
Earn Interest Lending Cryptocurrency Stablecoins
Final Thoughts

What is Cryptocurrency?

According to the IRS, a cryptocurrency: […] Is a type of virtual currency that utilizes cryptography to validate and secure transactions that are digitally recorded on a distributed ledger, such as a blockchain. But, unlike traditional currencies like the US dollar, no central government or financial authority controls cryptocurrencies. Rather, mathematics and the decentralized control enabled by this distributed, publicly-available ledger “regulate” cryptocurrencies. Basically, because anyone can see this virtual ledger, people are incentivized to follow the rules.

As a virtual currency, cryptocurrencies also function as a medium of exchange. That is, using this blockchain technology, two people can exchange cryptocurrency to settle a transaction (e.g. one person transfers an agreed upon amount of cryptocurrency to another to purchase an automobile). For instance, Bitcoin, one of the most popular cryptocurrencies, provides both public and private signatures to all users. That way, in a transaction, the sender and receiver must sign off on the exchange with both of these signatures, which are automatically verified for accuracy.

However, unlike the US dollar or other fiat currencies, the value of most cryptocurrencies is not supported by the good faith of a government. Rather, crypto value fluctuates based on the whims of the market and the associated supply and demand factors. This means that, in the right situations, the value of cryptocurrencies can skyrocket. But, the opposite remains true – market factors can lead to massive collapses in cryptocurrency value.

Due to this volatile nature, many people now view cryptocurrency primarily as an investment – not a medium of exchange. If you think the value of your crypto holdings could increase from $20 to $2,000, why would you risk buying a pizza with your cryptocurrency today? In other words, people now see investing in cryptocurrencies as a way to make a significant amount of money – not buy things.

Directly Investing in Cryptocurrency

Before buying cryptocurrencies, people should first understand that “investing” is a bit of a misnomer. Normally, when you buy a cryptocurrency, you don’t receive dividends, interest, or rents like you would with other investments. Instead, you bet that you can sell your holdings for more than you bought them. As a result, purchasing cryptocurrencies is more speculation than investing.

Having said that, you may potentially make a lot of money on a smart crypto purchase. If willing to accept the risks for these potential returns, the question becomes, how do I actually invest in cryptocurrencies?

Cryptocurrency Exchanges

To purchase crypto, most people use cryptocurrency exchanges. With these exchanges, users register an account and are then able to:

Buy cryptocurrencies with fiat currencies (e.g. US dollars, Euros, etc.)
Buy and sell cryptocurrencies using other cryptocurrencies

As with traditional currencies, users will see real-time prices on these exchanges. For example, if a given cryptocurrency is trading at $15, you can purchase 100 units of that particular currency for $1,500 ($15 x 100).

Hundreds of cryptocurrency exchanges exist, but some of the most popular ones include:

Binance
Coinbase
Kraken
Bitfinex

Additionally, these exchanges host what’s known as a crypto wallet, a tool for holding all the cryptocurrency you hold. With an online exchange, the incorporated cryptocurrency is a web-based one. This gives you the advantage of being able to access your holdings from any internet-connected device. But, an online wallet also creates the associated risk that someone can hack into that wallet.

Exchanges vs. Wallets

You can also purchase cryptocurrency directly from other people, that is, not on an exchange. But, to do this, you’ll need a crypto wallet. While most exchanges included embedded wallets, a wallet and exchange are actually two different things. An exchange lets you purchase cryptocurrency on the open market, whereas a crypto wallet stores all of your cryptocurrency holdings.

With a wallet embedded on an exchange, you inherently sacrifice some privacy, as you do not have complete control over that wallet. Alternatively, you can use a dedicated crypto wallet. Most of these are held offline, which A) grants you full control, and B) minimizes the likelihood of someone hacking into it to steal your crypto holdings via an exchange vulnerability.

Cryptocurrency Investing Steps

Having outlined the uses – and differences – of a cryptocurrency exchange and wallet, here are the standard steps to investing:

Step 1: Register with a cryptocurrency exchange.
Step 2: Connect your bank account to the exchange.
Step 3: Submit a purchase order for cryptocurrency.
Step 4 (optional): Transfer your purchases into a dedicated cryptocurrency wallet.

Once you complete Step 3, you have effectively traded your US dollars for cryptocurrency. When you decide to sell some of these holdings, you simply reverse the steps. Instead of creating a purchase order on an exchange, you create a sell order, selling your holdings for the current market rate.

Indirectly Investing with Cryptocurrency Stocks

If you want to invest in real estate, you don’t need to actually buy an investment property. You can buy shares in real estate investment trusts (REITs), construction companies, and other organizations related to real estate. Similarly, you don’t need to directly purchase cryptocurrency to invest in this asset.

A variety of cryptocurrency stocks and mutual funds exist. And, these function like normal, publicly-traded securities, allowing you to buy and sell them on a public market. But, rather than purchasing the underlying cryptocurrency, you purchase shares in an entity that holds or deals with cryptocurrency. This system allows you to gain cryptocurrency exposure in your investment portfolio without directly purchasing coins.

While not an exhaustive list, here are some of the stocks and mutual funds that let you indirectly invest in cryptocurrency:

Riot Blockchain (RIOT): Riot is a Bitcoin mining company focused on expanding large-scale mining operations in the United States.
Marathon Digital Holdings (MARA): Marathon is a patent holding company that purchased Bitcoin and Bitcoin mining equipment to expand into cryptocurrency investments.
Hive Blockchain (HIVE): Hive was the first publicly-traded cryptocurrency miner.
Voyager Digital (VYGVF): Voyager is a cryptocurrency trading app. While you can use the app itself to purchase crypto, you can also buy shares in the company to gain exposure.
Bitcoin Strategy ProFund (BTCFX): This fund invests in Bitcoin futures contracts. It is the first publicly-traded fund in the United States that attempts to have results that track Bitcoin’s performance.

NOTE: We are not endorsing any of the above securities. Rather, we are providing them solely as examples. As with all investments, conduct thorough research before purchasing any crypto-related stocks or mutual funds.

Earn Interest Lending Cryptocurrency Stablecoins

As discussed above, most cryptocurrencies have an inherent drawback: volatility. That is, they can experience huge swings in value – often quite quickly.

To combat this volatility, cryptocurrency developers created the stablecoin as an alternative type of cryptocurrency. Rather than fluctuate solely based on market conditions (i.e. supply and demand), stablecoins are pegged to other assets. Normally, these stablecoins track fiat currency like the US dollar or Euro. That is, stablecoins track the performance of these underlying currencies, which provides far more stability and predictability than traditional cryptocurrencies like Bitcoin.

Popular stablecoins pegged to fiat currencies include:

Tether: An unregulated cryptocurrency pegged to the US dollar.
Paxos Standard: A cryptocurrency pegged to the US dollar with an official charter from the New York State Department of Financial Services, meaning it can offer regulated services.
Gemini Dollar: A stablecoin backed by Gemini cryptocurrency but pegged to the US dollar and regulated on a monthly basis.

Due to their stability, stablecoins can be used in lending. Assume you have $100,000 in US dollars. If you lend that money to a borrower, you can collect interest on the outstanding loan. Similarly, investors can now lend stablecoins – not just dollars – to earn interest.

For example, companies like Gemini lend their stablecoins to institutional investors, charging interest in the process. But, Gemini also needs people to first buy its stablecoins before it can actually lend them. Accordingly, investors can A) purchase stablecoins, and B) collect interest on the loans that Gemini makes with those coins.

Currently, this form of lending leads to far higher returns than a traditional savings account, making this a compelling option for investors seeking more stable, higher-yield returns. But, not all stablecoin lending platforms comply to the same lending standards. Prior to pursuing this option, investors should thoroughly research the platform.

Risks to Investing in Cryptocurrency

Before investing in cryptocurrencies, you should consider the below risks.

Volatility

Cryptocurrencies represent one of the most volatile asset classes currently available. While stocks regularly go up and down, they rarely face the same level of astronomical growth immediately followed by massive crashes that come with cryptocurrency investments. Bottom line, be prepared for massive value swings – for better or worse – with your crypto holdings.

Lack of Regulation

Unlike government currencies and publicly-traded stocks and bonds, cryptocurrencies are not regulated. To some, this serves as a tremendous advantage (e.g. criminals who want to avoid government scrutiny and money trails). But, this lack of oversight also presents tremendous risk, as you largely have no legal recourse if anything happens to your crypto holdings (e.g. you lose them when your cryptocurrency exchange is hacked, which has occurred multiple times).

Final Thoughts

As illustrated, a variety of options exist to invest in cryptocurrency. You can directly purchase coins, invest in related securities (e.g. stocks and mutual funds), or purchase, lend and earn interest with stablecoins. However, before pursuing any of these options, investors should closely examine the associated risks.

Written by Veteran.com Team

The editorial team here at Veteran.com works to help the U.S. military community discover the many military benefits available to them. Our team is supported by our Veteran Review Board and its Standard of Care, which all content on Veteran.com is reviewed to meet.

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There has been growing interest in cryptocurrency like Bitcoin, Ethereum, and many others. Social media is full of speculators, traders, and celebrities interested in this type of investing and trading and over the years there’s been a fair bit of regulatory interest in crypto as well.

What do veterans, currently serving military, and family members need to know about cryptocurrency?

Military finance offices might not be overwhelmed with those seeking information about crypto, but the issue is important enough that the Internal Revenue Service has a set of regulations defining cryptocurrency’s status, how it may be taxed, and what Americans need to do to properly report their investments in this area on their federal tax forms.

What follows is NOT tax advice. It IS reporting on the materials published and distributed by the Internal Revenue Service.

Tax laws are subject to frequent change and for the most current tax year’s laws in any area (but especially crypto) you will need to consult a tax professional. Never assume that what you read online is the most current guidance until doing so.

What The IRS Says About Cryptocurrency

Let’s start by defining terms. The Internal Revenue Service refers to Bitcoin, Dogecoin, Ethereum, and others as “virtual currency”. If you search the IRS official site for policy related to crypto, search using “virtual currency” for best results.

What is the IRS idea of a virtual currency? From IRS.gov, which views Bitcoin and the rest specifically as a type of currency, “that utilizes cryptography to validate and secure transactions” digitally recorded on a “distributed ledger, such as a blockchain.”

There’s more. The IRS says virtual currency is a “digital representation of value” serving as a “medium of exchange, a unit of account, and/or a store of value.” It may act like fiat currency or actual cash.

In the eyes of the IRS, virtual currency does not have legal tender status in America. It is a “convertible” currency.

Tax Liabilities For Bitcoin?

The sale, exchange, or trade of virtual currencies may result in a tax liability. There is also potential tax liability for using virtual currency to pay for goods or services. You can also be taxed for “holding virtual currencies as an investment”.

Since virtual currency is treated as property on your federal tax forms, the rules that apply to property also apply to Bitcoin and others like it where applicable.

The IRS has stated on some forms and publications that in certain respects only specifically named virtual currencies may be subject to certain types of taxation. Ask a tax professional for further clarification.

For the purposes of this article, all virtual currencies are addressed but you’ll need to get professional tax advice to learn whether those rules apply specifically to your circumstances.

A payment made using virtual currency must be reported to the IRS in the same way you report other property. The following rules may apply:

When making payments to independent contractors and other service providers that are taxable, self-employment tax rules generally apply even when paying via virtual currency.
Wages paid to employees using virtual currency are taxable and must be reported by an employer on a Form W-2. These, the IRS says, are subject to federal income tax withholding and payroll taxes.
Third parties who pay in virtual currency “on behalf of merchants that accept virtual currency” must report payments to those merchants on Form 1099-K, Payment Card and Third Party Network Transactions according to the IRS official site.
Gains or losses from the sale or exchange of virtual currency depends on “whether the virtual currency is a capital asset in the hands of the taxpayer”.

Virtual Currency As A Capital Asset

The Internal Revenue Service has instructions for those who hold cryptocurrency as a capital asset. As mentioned above, the IRS does not recognize Bitcoin and others as currency, but rather as property.

That means that the taxation of Ethereum in this context has to do with its disposition as property, whether there was a profit or loss, and other variables.

The IRS says you could be taxed when you do any of the following with cryptocurrency or any other property. Some of what is listed below is not necessarily applicable to crypto but these are included here for context of the broader rules about disposing of property. You may have a tax liability when:

You sell property
You exchange property for other property
Your property is condemned or disposed of under threat of condemnation
Your property is repossessed
You abandon property
You give property away
You encounter a gain or loss when doing any of the above

How Much Is Virtual Currency Really Worth?

Virtual currency such as Bitcoin, Ethereum, etc. have no fixed market value. Unless you are dealing with so-called Stablecoins, which are backed by a specific amount of fiat currency (actual cash), the value of your virtual currency may fluctuate daily or even hourly.

How does the IRS calculate the fair market value of these assets?

IRS.gov states, “For U.S. tax purposes, transactions using virtual currency must be reported in U.S. dollars. Therefore, taxpayers will be required to determine the fair market value of virtual currency in U.S. dollars as of the date of payment or receipt.”

That illustrates one of the inherent risks of virtual currency–the amount you are taxed upon might not be the actual cash value of your crypto at tax filing time. Whether that means a profit for the taxpayer or a loss depends on circumstances. It’s a risk worth contemplating.

Consequences For Not Reporting Virtual Currency To The IRS

The Internal Revenue Service official site lists multiple possible penalties for failing to report cryptocurrency on your federal taxes.

The first of these consequences? You may be subject to an audit. The results of such an audit could, depending on circumstances, include monetary penalties as well as any interest associated with them.

“In more extreme situations” the IRS warns, you may be prosecuted for “failing to properly report the income tax consequences of virtual currency transactions”. If you are prosecuted in this manner you could be charged with tax evasion and filing a false tax return. Such charges may result in prison time and fines that go as high as a quarter of a million dollars.

Always discuss all your holdings with a tax professional if you aren’t sure about the current year’s tax laws, your specific obligation for reporting such assets, and the consequences of overlooking or omitting them from your tax filings altogether.

Using a tax professional to file your taxes is strongly encouraged when you have issues more complicated than a standard tax filing. The money you spend on tax prep today may be the IRS audit you avoid tomorrow. That’s not meant to serve as a promise you won’t get audited anyway, but the more seriously you take such taxation issues, the better off you are.

Written by Veteran.com Team

The editorial team here at Veteran.com works to help the U.S. military community discover the many military benefits available to them. Our team is supported by our Veteran Review Board and its Standard of Care, which all content on Veteran.com is reviewed to meet.

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Active duty military members must periodically renew their security clearances. And, depending on your clearance level, this may be a particularly intrusive process. With the increasing popularity of cryptocurrencies, many troops have asked if holding Bitcoin or other crypto types will affect their clearances. As such, we’ll use this article to outline some security clearance and cryptocurrency considerations.

Specifically, we’ll discuss the following:

Cryptocurrency Overview
Security Clearance Concerns with Cryptocurrency
Final Thoughts on Security Clearances and Cryptocurrency

Cryptocurrency Overview

However, the term virtual currency is somewhat misleading, as the IRS doesn’t actually consider cryptocurrency as actual currency like US dollars. Rather, it: […] is treated as property and general tax principles applicable to property transactions apply to transactions using virtual currency. Put simply, the IRS considers cryptocurrency to be property – not currency.

In theory, the fact that the IRS has declared cryptocurrency as property should influence the views of other federal agencies. But, when it comes to cryptocurrency treatment and reporting requirements, the Department of Defense (DOD) and the Director of National Intelligence (DNI) have not offered clear guidance. Accordingly, cryptocurrency holdings remain a gray area for military members concerned about their security clearances. While the DOD and DNI have stated they are working on guidance, no firm policies currently exist.

Due to this ambiguity, military members – understandably – want to know: 1) Do I need to report my cryptocurrency holdings during security clearance applications? And, 2) Will my cryptocurrency holdings affect my security clearance?

Security Clearance Concerns with Cryptocurrency

With respect to the first question, technically speaking, no, military members do not currently need to report their cryptocurrency holdings (though this will likely change when DOD and DNI publish clear guidance). To answer the second question, we need to first review the major purpose of a security clearance. According to the US Government: “background investigations for national security positions are conducted to gather information to determine whether you are reliable, trustworthy, of good conduct and character, and loyal to the [United States]. In simple terms, can the government trust you?”

When it comes to cryptocurrency, background investigators generally consider three potential issues that will affect this trustworthiness and, by extension, your security clearance. While these situations hopefully don’t apply to you, it helps to understand why an investigator may worry about cryptocurrency when reviewing your security clearance:

1) Financial Issues

Financial issues consistently rank as the number one reason why people have their security clearances denied or revoked. First, if you face major financial issues, those issues may speak to your reliability. While some financial problems arise for issues outside of our control (e.g. medical emergencies), risky investments can also create problems. If you’re willing to take huge gambles with your financial health, the government may question your judgment when it comes to national security matters.

Second, major financial issues can open you up to blackmail and other manipulation, particularly if you’ve used debt to purchase cryptocurrency. Due to the massive volatility of crypto, borrowing money to invest can quickly get someone into a lot of debt. If you end up owing too much money, you may expose yourself to negative influence, with someone forcing you to compromise security matters to forgive debt.

2) Criminal Behavior

Criminal behavior serves as another major reason why people lose their security clearances (or have their initial applications rejected). Today, a perception exists that a large percentage of cryptocurrency transactions are used for criminal activity. Frankly, it doesn’t matter whether or not this is true. What matters to a background investigator is that cryptocurrency can be used to finance illegal activity and purchases (e.g. selling and buying illegal drugs or services on the dark web).

As a result, from an investigator’s perspective, a large amount of cryptocurrency could indicate involvement in these sorts of activities.

3) Foreign Influence

Finally, foreign influence consistently ranks as a major reason for security clearance problems. As outlined above, confirming loyalty to the United States serves as a central purpose behind the entire clearance process.

With conventional banking, the government has plenty of tools to flag suspicious bank transfers. For example, financial institutions are required to file Suspicious Activity Reports when they suspect money laundering or fraud. Tools like this make it far easier for the government to identify a major deposit in someone’s bank account from a foreign government.

Cryptocurrency transfers, on the other hand, are largely untraceable. As such, a foreign government could send regular transfers to a military member in return for classified information – without a clear mechanism for the US government to flag those transfers.

Once again, we’re not suggesting that holding cryptocurrency means that you’re being influenced by a foreign government. Rather, because the potential for this influence exists, background investigators will want to know the source of your cryptocurrency holdings.

Final Thoughts on Security Clearances and Cryptocurrency

Technically speaking, military members do not currently need to report cryptocurrency holdings on their security clearance applications. However, certain federal employees and contractors do need to file cryptocurrency disclosures, suggesting that service members will also need to in the future.

But, when it comes to security clearances, one characteristic proves more important than any others: honesty. Bottom line, don’t lie during the security clearance process – either through commission or omission. In your interview, it’s far better to disclose cryptocurrency holdings – even if not technically required to do so – than appear to hide something from an investigator.

If you have an honest explanation for how you received your crypto, you shouldn’t have any issues. As discussed, your investigator will primarily want to confirm you’re not dealing with: 1) financial issues, 2) criminal activity, or 3) foreign influence.

Written by Veteran.com Team

The editorial team here at Veteran.com works to help the U.S. military community discover the many military benefits available to them. Our team is supported by our Veteran Review Board and its Standard of Care, which all content on Veteran.com is reviewed to meet.

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Over the past decade, cryptocurrency holdings have skyrocketed. And, the military community is no exception, leading many veterans to ask if they can use these assets to buy homes. While you can use cryptocurrency during the homebuying process, key limitations exist. As such, we’ll use this article to explain using cryptocurrency for a down payment or closing costs on a VA loan.

Using Cryptocurrency For A Down Payment Or Closing Costs On A VA Loan

Specifically, we’ll discuss the following:

VA Loan Overview
What is Cryptocurrency?
VA Loan Considerations: Using Cryptocurrency for a Down Payment or Closing Costs
Potential Tax Implications
Final Thoughts

VA Loan Overview

For eligible active duty and veteran borrowers, the VA loan offers the below terms:

No down payment required
No private mortgage insurance (PMI) required
Low interest rates
Streamlined refinancing option via the Interest Rate Reduction Refinance Loan (IRRRL)

However, while the Department of Veterans Affairs guarantees VA loans, it doesn’t actually lend funds. Instead, a variety of VA-approved lenders (e.g. banks, credit unions, and mortgage companies) issue these loans. This means that, in addition to meeting VA guidelines, borrowers must comply with requirements set by individual lenders. Accordingly, we will use this article to discuss cryptocurrency and VA loans in general. You’ll need to discuss specifics with your lender.

Additionally, if the VA doesn’t require a down payment, why would borrowers ask about using cryptocurrency for a VA loan? First, you can put money down with a VA loan as a means of increasing your immediate equity in a home. Second, even if you don’t put money down, you absolutely will need to pay closing costs – often thousands of dollars – with a VA loan. And, many veterans want to use their cryptocurrency holdings to cover these costs.

What is Cryptocurrency?

Before diving into using cryptocurrency with VA loans, we need to briefly discuss this asset. More precisely, we need to discuss this relatively recent phenomenon in the context of the IRS. VA loans – and mortgages, in general – are heavily regulated by the federal government. As a result, lenders look closely at IRS guidance when considering any sorts of assets, particularly newer ones like cryptocurrency.

Phrased differently, it doesn’t matter that you believe that your cryptocurrency holdings should be treated a certain way. What matters is how the IRS views these assets, as that largely informs how individual mortgage lenders will treat cryptocurrency.

According to the IRS, cryptocurrency: […] Is a type of virtual currency that uses cryptography to secure transactions that are digitally recorded on a distributed ledger, such as a blockchain. However, the term virtual currency is somewhat misleading, as the IRS doesn’t actually consider cryptocurrency an actual currency like US dollars. Rather, it: […] Is treated as property and general tax principles applicable to property transactions apply to transactions using virtual currency.

Put simply, the IRS considers cryptocurrency to be property – not currency. As a result, lenders will not accept your cryptocurrency holdings as direct payments. That is, if you owe $10,000 in closing costs on a VA loan, you can’t just transfer $10,000 in Bitcoin to your lender. Despite this reality, options do exist to use cryptocurrency to pay VA loan costs, which we’ll discuss in the next section.

VA Loan Considerations: Using Cryptocurrency for a Down Payment or Closing Costs

Asset Verification

During the loan underwriting process, lenders focus closely on verifying your assets. For VA loans, lenders will want to confirm that you have the cash on hand to A) pay closing costs, and B) if relevant, pay your down payment. Typically, this means reviewing checking, savings, or money market account statements to verify funds. For example, if your lender estimates $10,000 in closing costs, you’ll need to submit your most recent account statements verifying that you have at least that amount of cash set aside.

Conversion to Cash

However, if you plan on using non-cash assets (e.g. stocks, bonds, mutual funds, etc.) to cover your closing and down payment costs, you need to take an additional step. Lenders won’t accept shares of Apple or Microsoft to pay your closing costs. Instead, borrowers will need to liquidate these assets, that is, sell and convert them to cash. Once you make these sales, lenders will then verify that the cash has been deposited into one of your accounts.

Cryptocurrency falls into this category. If you have $10,000 in a crypto account, showing a lender that account balance will not suffice. Instead, you’ll need to A) sell your holdings, and B) deposit the funds into a cash account. Lenders will then verify this cash by reviewing your account statements. In this fashion, you can indirectly use cryptocurrency for a VA loan down payment or closing costs. That is, you can convert your crypto holdings into cash and use the cash to pay these items.

The Importance of Documentation

Closely related to asset verification, lenders will demand clear documentation of any cryptocurrency assets. More precisely, lenders will require a clear paper trail confirming that A) you own the crypto holdings, and B) you have converted them to cash.

Unfortunately, most cryptocurrency wallets don’t provide traditional monthly/quarterly account statements like bank accounts. Rather, you’ll need to confirm what sort of documentation your lender will accept. For instance, some lenders may accept screenshots of your wallet for the past couple months. Ultimately, it’s up to the individual lender, so confirm early in the VA loan application process what sort of documentation they’ll need to cover their cryptocurrency-to-cash paper trail requirements.

NOTE: The federal government also mandates that lenders follow strict anti-money laundering requirements. As a result, if you have any large cryptocurrency purchases, plan to document where you received the original funds to make those purchases.

Potential Tax Implications

Prior to selling cryptocurrency holdings to pay for VA loan closing costs, borrowers should also consider the potential tax implications. Due to the fact that the IRS treats cryptocurrency as property, sales are subject to property-related taxes. In other words, if you sell your holdings for more than you purchased them, you will be subject to capital gains taxes. And, depending on how long you held that cryptocurrency, you’ll either pay ordinary income tax rates or the more favorable long-term capital gains rates.

Bottom line, if unsure of the tax implications of a cryptocurrency sale, you should consult with a tax professional. With proper planning and tax strategies, you can at least minimize the tax bill you’ll face for a sale.

Final Thoughts

Unfortunately, borrowers cannot directly use cryptocurrency for a down payment or closing costs on a VA loan. But, if willing to convert your holdings to cash, you can use cryptocurrency sale proceeds for these loan-related costs. However, due to the fairly novel nature of this approach, make sure to communicate early and often with your lender about requirements pertaining to cryptocurrency assets.

Written by Veteran.com Team

The editorial team here at Veteran.com works to help the U.S. military community discover the many military benefits available to them. Our team is supported by our Veteran Review Board and its Standard of Care, which all content on Veteran.com is reviewed to meet.

How To Invest In Cryptocurrency