Cryptocurrency Investors May Have to Pay Tax for Their Frozen Funds

Vignesh Karunanidhi
Crypto Investors May Have to Pay Tax for Their Frozen Funds
Source: Holborn Assets

Cryptocurrency investors went through the toughest period in 2022. Thousands of investors were locked out of accessing their funds, and many lost their life savings. When cryptocurrency behemoths like Terra and FTX collapsed in 2022, little did the investors know the intensity of the losses.

Investors believed that the rough times were over, but tax bills followed. This is what happened to Roman Smolkin, a cryptocurrency investor whose $200,000 worth of assets were locked away on Celsius. When Celsius halted withdrawals in June, Smolkin went through the toughest period of his life, according to Bloomberg. But, what could be worse than asking to pay tax on your lost funds?

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Source: BQ Prime

Smolkin asked to pay $8,000 interest for his locked-away cryptocurrency

To add to the pain of being locked away from the hard-earned funds, Smolkin owed $8,000 in taxes for the interest he received in 2022. “I’m honestly freaking out. It’s beyond frustrating — I lost the entire thing that earned the interest to begin with,” he said.

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Even though several investors lost their life savings in 2022, investors are getting tax bills for their frozen holdings at Voyager Digital and Celsius. This also comes at a time when cryptocurrency prices are not in their best shape. Even though 2022 witnessed prices plummet, 2023 is better in terms of price. However, paying taxes on locked-away funds is one of the worst-case scenarios anyone could face.