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Taxes and Legal Tips When You Cash Out Crypto 

kokou adzo



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After you’ve been trading cryptocurrency for a while, you may decide to cash out your crypto and convert it into fiat currency. You can do this in several ways, such as by selling Bitcoin and other coins through a P2P exchange, withdrawing cash at a Bitcoin ATM, owning a crypto debit card, and using the help of a broker. 

In most cases, cashing out crypto is a taxable event. However, there are a few loopholes that allow traders to legally reduce their taxes when converting crypto into cash. Join us as we discuss the top taxes and legal tips relating to cashing out crypto! 

Some people are hesitant to loaning crypto because of the market’s volatility and the inherent dangers involved with lending digital assets.

In this article, you’ll learn:

  • How to cash out crypto in four ways
  • How to avoid taxes when cashing out crypto 
  • The best legal tips for crypto cash out

How To Cash Out Crypto 

Ready to convert your crypto into cash but don’t know where to start? Don’t worry; cashing out crypto can be simple, cost-effective, and hassle-free! Here are the four best ways you can cash out your crypto! 

1. Through a Peer-To-Peer Exchange 

Top recommendation: Binance P2P

If you’re looking for an affordable way to convert hundreds of different cryptocurrencies into cash, then you should consider using a peer-to-peer crypto exchange. These platforms facilitate transactions between traders who want to sell, buy, and exchange their crypto. As there are no intermediaries involved, traders can control how much cash they want to sell their coins for.

To sell your crypto through a P2P exchange, you just need to find a suitable platform, create an account, and connect your bank account (for your cash to be sent to). As a side note, many P2P exchanges do not require KYC and other identification checks, making peer-to-peer selling a highly private option for traders. 

After you’ve created an account, you can post a listing that shows which crypto you want to sell and what you want in return (crypto assets, fiat currency, or other digital currencies). Once you’ve posted your listing, other traders on the platform can view it and make an offer. 

Next, you can look through all the offers and pick one. You’ll then have a chance to further negotiate prices with the buyer until you both come to an agreement. The transaction will then be finalised, and shortly after, you’ll receive your cash in your bank account. 

2. With a Crypto Broker

Top recommendation: Bitcoin Up

For some, using a P2P exchange can be overly complicated and time-consuming. In particular, if you’re an inexperienced trader, then you may require more assistance when cashing out your crypto assets. In this case, you’ll benefit the most from using a crypto broker. 

A crypto broker is basically a middleman that sits between traders and the crypto market. These brokers provide various tools and resources that make it easier for users to build up their portfolios, practice trading, and cash out Bitcoin or other cryptocurrencies. Crypto brokers suit all kinds of traders but are most helpful for those navigating the markets for the first time. 

To use a broker to cash out crypto, we suggest first signing up for a crypto platform. Crypto platforms use automatic algorithms (usually powered by AI) to match their users with brokers that are best suited to their individual needs. Using a crypto platform can help save time when cashing out crypto, as traders won’t need to search for a broker themselves.

After the platform has connected you with a broker, you simply need to inform the broker that you want to cash out your crypto assets, and they will walk you through the necessary steps and offer advice when needed. 

3. Using a Crypto Debit Card

Top recommendation: BitPay Debit Card

If you want lower transaction fees when converting your crypto into fiat currency, then you may enjoy using a crypto debit card. Crypto debit cards work the same way as regular debit cards. But instead of them being connected to your bank account, they’re connected to your crypto wallet.

You can use crypto debit cards as a payment method for online and in-store transactions using your crypto assets. These are one of the most convenient ways to convert your cryptocurrency into cash, especially if you intend to make purchases regularly. You can also use your crypto debit card at select ATMs to withdraw cash directly. 

To use a crypto debit card, you just need to make an account with a suitable provider and order a physical card. Once this card has been sent to you, you can activate it and use it at thousands of physical and online stores. Some crypto debit card providers also have mobile apps that you can download to check your balance and transaction history.

4. At a Bitcoin ATM

Top recommendation: General Bytes Bitcoin ATMs

Last but not least, you can also cash out Bitcoin and other cryptocurrencies using a Bitcoin ATM. Bitcoin ATMs are just like traditional ATMs that you’d use to withdraw funds from your bank account. However, like crypto debit cards, Bitcoin ATMs connect directly to your cryptocurrency wallet to automatically convert your assets into cash. 

There are thousands of Bitcoin ATMs worldwide, and you can find one that’s close to you using a Bitcoin locator map. After you’ve found one, all you need to do is approach it and connect your crypto wallet (usually by scanning a QR code). The ATM will then convert your crypto into your chosen fiat currency.

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How To Minimise Taxes When Cashing Out Crypto 

It’s highly important for traders to comply with all applicable tax laws and regulations. That being said, there are a few ways to legally reduce how much taxes you’ll need to pay when cashing out your crypto. They are as follows:

Offset Gains With Losses 

Offsetting cryptocurrency gains with losses is a common strategy utilised by traders to reduce their overall tax liability. Offsetting gains simply means claiming your losses on investments to balance your earnings.

For example, if you made £20,000 from trading Bitcoin, but you also lost £20,000 from trading a different cryptocurrency or other assets, then you won’t owe any tax. This is because you’ve broken even with your investments and haven’t made an overall profit. 

So, to offset your gains, when you’re deciding to cash out your crypto, be sure to check for any losses you’ve incurred from other investments. Do note that you can only offset gains with losses you’ve made within the same year. Additionally, if your losses exceed your gains, you may also be able to deduct these losses from other taxable income. 

Get a Crypto Loan

A crypto loan is a type of loan where borrowers use their crypto assets as collateral. Crypto loans can be a terrific option for traders who want quick access to cash with minimal taxes. By getting a loan, you’re not technically cashing out your crypto and, therefore, not creating a taxable event.

However, before taking out a loan, be sure to check your country’s tax laws regarding loans, as they can vary between locations. For example, the IRS, which is the revenue service of the United States, considers loans as non-taxable events. 

There are plenty of crypto lenders to choose from, many of which accept a wide range of cryptocurrencies such as Bitcoin, Ethereum, Bitcoin Cash, Tether, and Ripple as collateral. After you’ve chosen a lender that suits you, you need to decide how much cash you want to borrow. Next, you can apply for your loan and wait for it to be approved. After approval, which can take between a couple of minutes and several days, you’ll have access to your cash! 

Gift Your Crypto

Depending on your country, you can also dispose of your crypto assets without paying any tax by donating or gifting them. In many jurisdictions, traders can gift or donate up to a certain amount of crypto each year without needing to pay tax.

For instance, in the United Kingdom, traders can gift crypto to a spouse or a civil partner without paying tax. In this case, there is no limit on how much crypto you can give, and therefore is a valid way to lower your overall capital gains tax bill. Additionally, you can donate your cryptocurrency to a registered charity and get a tax deduction worth the full value of your assets. 


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Although this may seem like a drastic measure, relocating to another country is a legitimate way to reduce taxes when converting crypto into cash. Even though many countries have already implemented tax laws and regulations, this is not the case everywhere. In some areas around the world, there are currently no capital gains tax requirements for crypto owners. 

If you really want to drastically reduce how much taxes you’ll need to pay when converting your crypto into cash, here’s a list of countries you can consider relocating to: 

  • Switzerland – No CGT (capital gains tax) for individual investors
  • Germany – No CGT on long-term gains (12 months)
  • Malta – No CGT on long-term gains and no gift taxes
  • United Arab Emirates – No CGT  for individual investors
  • Portugal – No CGT on long-term gains (12 months)
  • Singapore – No CGT for individual investors

Legal Tips for Cashing Out Crypto

Hold up! Before you start cashing out your crypto, check out our top legal tips! 

Understand Local Tax Laws

As we’ve previously mentioned, crypto tax laws vary drastically between jurisdictions. Before you start cashing out your crypto or utilising the methods we’ve discussed to reduce your taxes, you need to research your local laws. If you don’t, you may accidentally pay more tax than you need to or even end up in legal trouble. 

To fully understand your local laws regarding crypto tax, we recommend checking your country’s revenue service (such as the HMRC for the UK and the IRS for the US). However, we understand that researching tax-related laws can be complicated and even overwhelming. 

Consult a Professional

If you’re struggling to get your head around your country’s local laws, then we suggest consulting a tax professional who is familiar with tax laws in your jurisdiction. They will be able to review your situation and offer personalised advice to ensure you comply with applicable tax regulations. 

A professional will also help you to reduce how much taxes you’ll need to pay without breaking any laws. Remember, engaging in tax evasion can lead to severe legal consequences such as fines or worse. We understand the importance of reducing tax payments, but under no circumstances should traders attempt to break the law. With the help of a professional, you can ensure you’ll remain within legal guidelines. 

Track Your Gains and Losses

When cashing crypto, it’s vital to maintain detailed records of all your transactions. You should also keep track of any gains and losses you’ve made throughout each year. This is important as making a mistake when calculating your taxes can be extremely costly and can result in lots of hassle.

Luckily, there are plenty of tools and software to help you out. For instance, you can utilise crypto tax software such as CoinTracker to make tracking tax and profits much easier. Platforms such as these will unify your transaction history, generate tax reports, and optimise cost basis accounting methods. 


To summarise, it is possible to significantly reduce how much taxes you’ll need to pay when cashing out crypto. For a start, you can offset your gains with losses to decrease your tax liability. If this isn’t possible, then you can instead choose to get a crypto loan or donate your crypto. In these cases, cashing out your crypto is not considered a taxable event. 

As a more drastic measure, you can relocate to a country with favourable tax laws, such as Malta, Switzerland, or Germany. This way, you can sell Bitcoin and other crypto without paying capital gains taxes. Just remember to abide by all applicable laws when cashing out your crypto.


Kokou Adzo is the editor and author of He is passionate about business and tech, and brings you the latest Startup news and information. He graduated from university of Siena (Italy) and Rennes (France) in Communications and Political Science with a Master's Degree. He manages the editorial operations at

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