Crypto Record Keeping is More Important Now Than Ever
With so much volatility in the crypto markets, it's never been more important to keep accurate data and protect your funds.
Fri Nov 11 2022
It's been a tough few months for cryptocurrency investors.
The value of Bitcoin, the largest and most well-known cryptocurrency, has fallen by over 60% since its peak in November 2021. And it's not just Bitcoin that's struggling - the entire cryptocurrency market is in the midst of a huge shake-up with Celsius closing down and FTX on the brink of collapse.
So why is record keeping so important right now? Let's rewind the clock back a few years to 2014 when Mt Gox abruptly closed its doors to users and stopped all withdrawals. When the doors closed, all those users suddenly found that they had no access to their accounts or any records. Despite a long-running legal process and criminal investigations, 8 years later and investors are still waiting for closure.
It's easy with hindsight to see why record keeping is so important, losses can only be filed for tax reasons with accurate records which may suddenly became unavailable if an exchange is closed.
So what does this mean for today?
One of the most worrying aspects of the current bear market is big players Celsius and now FTX being forced to close their doors.
At the time of writing both Celcius and FTX are still accessible for users to export their trading history, but these closures are a stark reminder that even the biggest and most well-established cryptocurrency businesses are not immune to the market downturn. And as more businesses fail, there is a real risk that their customers' data could be lost forever.
How to protect your funds and your data
The old crypto adage "not your keys, not your coins" rings true louder than ever. Users of any exchange should carefully consider where their funds are located and ensure that they take steps to secure their tokens. Cold or Hardware wallets are a great option to keep savings safe and prevent any failed exchanges from taking your funds down with them. Whilst it might be handy to keep small amounts of crypto “hot” on an exchange ready for deployment, moving reserves away into a safe place is always a good idea.
Exporting transaction history and statement files is vital to ensure that your activity is recorded should you need it. HMRC have issued clear guidance on record keeping being the user's responsibility stating:
Cryptoasset exchanges may only keep records of transactions for a short period, or the exchange may no longer be in existence when an individual completes a tax return. The onus is therefore on the individual to keep their own records for each cryptoasset transaction.
We've got a detailed write up on the importance of crypto record keeping in our comprehensive UK tax guide.
Get Started with Recap to Make Record Keeping Simple
One of the easiest ways to securely store your data is using Recap's exchange integrations. You can connect your Celsius or FTX API keys to pull in your trading history and calculate your taxes or import your BlockFi CSV to see a comprehensive overview of your trading history.
We've included two quick guides on how to connect these accounts: