Expert Calls This Action On XRP the Smartest Move In Crypto

Versan Aljarrah, co-founder of Black Swan Capitalist, has highlighted the potential tax benefits of borrowing against XRP holdings instead of selling them, tagging it one of the smartest moves in crypto.

Defining Taxable Events in Cryptocurrency Transactions

Aljarrah’s post was accompanied by an interview in which he sought clarification from Gordon on how borrowing against cryptocurrency functions within the current tax framework.

Aljarrah posed the question of how this method compares to outright selling from a tax standpoint. Gordon responded by outlining the principles that govern taxable events in cryptocurrency transactions.

Gordon began by noting that one of the most reliable ways to minimize tax liabilities is to avoid creating a taxable event. He explained that selling, exchanging, or disposing of cryptocurrency constitutes a taxable event under current regulations. This includes moving from one crypto asset to another, which is treated similarly to selling for tax purposes.

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How Borrowing Against XRP Avoids Tax Triggers

He then contrasted this with the act of borrowing against cryptocurrency holdings. If an investor uses XRP, Bitcoin, or any other token as collateral to secure a loan, Gordon stated that this action does not create a taxable event.

In such a scenario, the investor receives either cash or another asset in exchange for pledging their crypto as collateral, without the transaction being recognized as a sale or exchange. This allows for immediate liquidity while preserving the underlying position in the asset.

However, Gordon emphasizes that while this strategy can be effective from a tax perspective, the broader financial implications need to be considered. The borrower remains responsible for repaying the loan at a later date, which requires careful financial planning.

Factors such as interest rates, market volatility, and repayment terms must be evaluated to determine whether borrowing against crypto is appropriate for an individual’s situation.

Strategic Advantages for Long-Term Holders

He further noted that for investors who are confident in the long-term price appreciation of their holdings, borrowing rather than selling can be advantageous.

This approach allows them to retain exposure to potential future gains while postponing taxable events. According to Gordon, in such circumstances, this is “often a very effective tax strategy.”

Aljarrah’s focus on XRP in particular aligns with his long-standing view of its potential in the broader financial system. His emphasis on strategic tax planning reflects an increasing awareness among cryptocurrency investors of the need to integrate legal and financial expertise into portfolio management.

With the regulatory environment continuing to evolve, the approach highlighted by Gordon could become a more widely adopted method for investors seeking to optimize both liquidity and tax efficiency.

Disclaimer*: This content is meant to inform and should not be considered financial advice. The views expressed in this article may include the author’s personal opinions and do not represent Times Tabloid’s opinion. Readers are advised to conduct thorough research before making any investment decisions. Any action taken by the reader is strictly at their own risk. Times Tabloid is not responsible for any financial losses.*