When owning and trading crypto, you can’t rely on your crypto exchange or digital wallet to keep all the records you’ll need for taxes and other purposes. For starters, they simply don’t keep all the records you’ll need; in addition, if anything ever happened to their servers, you’d be without even those vital records they do store. All income earned from selling or mining crypto must be reported to the IRS, while many expenses and losses you incur from these activities may be tax deductible You may also be required to report goods and services tax / harmonized sales tax (GST/HST.) Keeping your own records is the only way to ensure you have all you need to thoroughly track and properly report upon your crypto activity, and the only way to protect yourself from loss through tax penalties or other consequences of poor record keeping. You want to figure out how to buy Bitcoins with cash as this is very convenient.

Generally speaking, you should make a record of every instance in which you buy, sell or mine cryptocurrency. 

Isn’t Blockchain Good Enough?

Blockchain is the digital ledger on which all crypto transactions are stored. It is used because it is transparent, secure, trackable and can’t be duplicated. Anyone can look up a particular transaction or track the ownership of any cryptocurrency. This raises the question: if the blockchain is so good at keeping crypto records, why do you need to keep your own records too?

One common instance in which blockchain alone would be insufficient record-keeping would be when you have your total crypto holdings dispersed among multiple crypto exchange accounts and crypto wallets. Each crypto you own may be held on a different self-hosted, custodial or centralized platform or pooled or staked on DEXes. In order to reconcile transactions from multiple sources, you’ll need accurate and detailed records the likes of which blockchain alone cannot provide. 

This necessity becomes even more apparent when you own crypto wallets from assorted chains, like Bitcoin and Ethereum. 

Records All Crypto Owners and Traders Should Keep

If you’ve conducted even one cryptocurrency transaction in your life, there are certain records you should keep. Some, the IRS advises you to keep in case of an audit, while others are simply necessary if you plan to itemize your transactions for tax purposes. 

For every crypto transaction you make, record the following:

  • Date of transaction
  • Cryptocurrency addresses
  • Transaction ID
  • Receipt for the crypto transfer or purchase
  • Crypto value at the time of the transaction
  • Description of the crypto transaction and the crypto address or other identifying details about the other party in the transaction
  • Exchange and wallet records
  • Accounting and legal-cost records
  • Tax management software costs

For Crypto Miners

If you mine cryptocurrency, there are other records you should be keeping, namely:

  • Purchase receipts for cryptocurrency mining hardware
  • Expense receipts associated with your crypto mining operation
  • Mining pool records and contracts
  • Any other mining activity records
  • Records of cryptocurrency disposal your mining activities earned

Whether you use crypto record-keeping software or maintain your own records manually on an Excel spreadsheet, keeping track of these salient details is the best way to protect your crypto investment and, in so doing, your future.