Crypto pledged to support a borrowing position and potentially available for liquidation if the position becomes undercollateralized.
Pledging collateral is not a sale; you still own it, and basis and holding period continue. The tax event is the liquidation, when the protocol sells your collateral to cover the loan. That is a disposal at the protocol's execution price.
No. The tax event is a liquidation, or your own repayment and withdrawal if you later sell the collateral.
Source: IRC 1001; IRS Notice 2014-21
Last reviewed September 18, 2026. Tax rules change; confirm current law before acting.
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