Crypto Lending: Taxation of Interest and Collateral
Crypto lending —lending or borrowing digital assets— is one of the most popular ways to generate passive yield. However, it has tax implications that many users overlook.
Lending Cryptocurrencies: Taxation of Interest
When you lend your cryptocurrencies (on Aave, Compound, Nexo, BlockFi…) and receive interest:
Classification: Income from movable capital (Article 25.2 IRPF).
Taxable event timing: When the interest is credited, at the market value at that moment.
Example:
- You lent 10,000 USDC at 5% APY.
- You receive 500 USDC in interest during the year.
- 1 USDC ≈ €0.95 on that day → declarable yield: €475.
Borrowing Cryptocurrencies: Collateral
When you deposit cryptocurrencies as collateral to obtain a loan in another asset:
- The deposit of collateral does not generate a taxable event — there is no actual transfer.
- The loan received is not income — it is a debt.
- Interest paid is not deductible for individual IRPF (it is for companies).
Forced Liquidations
If the value of your collateral falls below the collateralization ratio and the protocol automatically liquidates you:
Tax-wise, a transfer of your collateral occurs at the liquidation price.
The gain or loss is calculated as:
- Transfer value = liquidation price in EUR.
- Acquisition cost = FIFO cost of the liquidated collateral.
Painful example:
- You had 1 ETH as collateral, acquired at €1,500.
- The protocol automatically liquidates you when ETH is worth €1,200.
- Capital loss: 1,200 − 1,500 = −€300 (deductible).
aTokens and cTokens (position tokens)
When you deposit in Aave, you receive aTokens. When you deposit in Compound, you receive cTokens. Are these a transfer?
The most widespread position among tax advisors is that there is no transfer upon receiving aTokens/cTokens, as they are simply a receipt of your position. What is taxed is the accumulated yield when you withdraw.
However, one must stay alert to changes in AEAT criteria on this point.
CeFi Platforms (Nexo, Celsius, BlockFi…)
The treatment is the same as DeFi: interest is taxed as income from movable capital. The difference is that in CeFi there is an intermediary that theoretically could apply withholding, although in practice foreign exchanges do not do so.
If the platform goes bankrupt (like Celsius), the unrecovered amounts are declarable capital losses.
Conclusion
Crypto lending generates declarable yields in the year of credit. Interest paid is not deductible for individuals. And forced liquidations are transfers with their corresponding gain or loss. Keeping a record of every lending position is essential for a correct tax return.