Borrowing against crypto instead of selling it is one way people try to spend crypto without selling it, and the other is a card that converts coins when you pay. Both are real options, and the tax and risk differences between them are worth understanding before you pick one. Below I use one provider’s own page, the IRS’s FAQ and a law-firm article, and I label the rest as my reasoning. The example numbers are assumed.
How One Card Describes Its Two Modes
Nexo’s cards page describes a Credit Mode that lets you make purchases without selling your crypto, and a Debit Mode that spends your digital assets directly, with conversion handled for you. It says you can switch between modes at any time, that its credit line lets you borrow without selling your digital assets, and that there are no credit checks and no fixed repayment schedule. It lists borrowing “from 1.9% per year” and notes rates “may vary by region, loyalty tier, and other applicable factors.” It also says the card is currently available only to citizens and residents of selected European countries (Nexo). So this product may not be available where you live, and I’m not recommending it.
Spend Crypto Without Selling: Selling Versus Borrowing for Tax
The IRS FAQ says that if you sell digital assets for U.S. dollars you must recognize any capital gain or loss (FAQ 49), that paying for services with digital assets is a disposition (FAQ 62), and that exchanging digital assets for other property, including other digital assets, also produces a gain or loss (FAQ 64). It says the gain or loss is long-term if you held the assets for more than one year (FAQ 50) (IRS FAQs on digital asset transactions).
A law-firm article says borrowed money isn’t taxable when it’s a genuine loan you must repay, and that the tax arises later if the debt is forgiven (Wood LLP). The same article describes a Tax Court case where a loan secured by pledged securities, which the lender sold, was treated as a sale because of how the deal was structured and carried out. That case involved securities, not crypto.
My reasoning, not a ruling: a debit-style crypto card that converts your coins when you spend looks like a disposition under the IRS FAQ above, while a loan that you repay looks like borrowing under the law-firm article.
Choosing Which Coins to Sell
The IRS FAQ says that for units held in a single unhosted wallet you may identify the basis and holding period of the units you sell, no later than the transaction, and must keep adequate records (FAQ 82). If you don’t meet that, it describes a default rule that treats units as sold in order of acquisition, earliest first (IRS FAQs on digital asset transactions).
A Simple Loan-to-Value Check (Assumed Numbers)
Loan-to-value (LTV) is the loan divided by the collateral’s value. Say you pledge $10,000 of crypto and borrow $2,000, so the LTV is 20%. If the collateral falls to $5,000 and the loan is unchanged, LTV is $2,000 ÷ $5,000 = 40%. If it falls to $4,000, LTV is 50%. The loan stays the same while the collateral shrinks, so LTV rises. Providers set their own liquidation levels. Coinbase’s loan help page, for example, gives 86% as the LTV at which collateral is liquidated to repay the loan plus a 4.38% penalty, and says the liquidation level varies by asset (Coinbase). With the example above, an 86% LTV on a $2,000 loan is reached when the collateral falls to $2,000 ÷ 0.86, about $2,326, a drop of about 76.7% from $10,000.
| Assumed collateral | Loan | LTV |
|---|---|---|
| $10,000 | $2,000 | 20% |
| $5,000 | $2,000 | 40% |
| $4,000 | $2,000 | 50% |
What Selling Would Cost, Illustrated
Also assumed: if the same $10,000 of coins had a cost basis of $3,000, selling would realize a $7,000 gain, which is the amount that would be subject to capital gains tax at whatever rate applies to you. Borrowing $2,000 instead would not by itself realize that gain under the article above, as long as it is a genuine loan. The trade-off is the risk shown in the table.
If You Do Sell: Choose the Coins Deliberately
Spending from a card that converts your coins is a sale, so the lot it uses decides the gain. Under the IRS FAQ above, units in a single unhosted wallet can be identified by basis and holding period, no later than the transaction, and you must keep adequate records (IRS FAQ 82).
An assumed example: you spend $10,000 worth of a coin. One lot cost $3,000 and another lot, now also worth $10,000, cost $9,000. Using the first lot realizes a $7,000 gain, and using the second realizes a $1,000 gain, a $6,000 difference. At an assumed 15% rate, the tax is $1,050 versus $150. The default rule sells the earliest-acquired units first, so identifying the lot in advance is what gives you the choice. The lots and the rate are made up for illustration.
How to Get Started With Spending Crypto Without Selling
- Borrow well below your lender’s maximum. That is my suggestion, since the LTV arithmetic above shows how fast it rises.
- Estimate the tax you would owe if your collateral were sold, using your cost basis.
- Keep records of every conversion, since the IRS FAQ treats paying with digital assets as a disposition.
- Check whether the product is available where you live.
Spending Crypto Without Selling: Questions Answered
Is borrowing always tax-free? The law-firm article says a genuine loan isn’t taxable, but it also describes a case where a securities-backed arrangement was treated as a sale. Structure matters.
Is paying with a crypto debit-style card taxable? Per the IRS FAQ above, paying with digital assets is a disposition that produces a gain or loss.
Does this work the same everywhere? No. I only reviewed U.S. sources for the tax points, and Nexo says its card is limited to selected European countries.
My Take on Spending Crypto Without Selling
- In my view, the best fit depends on how much cushion you keep: a small loan against a large pile of coins leaves more room than a large loan against a small one.
- In my suggestion, decide your maximum LTV before you borrow, and write it down.
Sources
- Nexo: Cards
- Wood LLP: Loans aren’t taxable
- IRS: Frequently asked questions on digital asset transactions
- Coinbase Help: USDC loan collateral
Related reading: Crypto-Backed Loans vs Traditional Loans — The Risk Nobody Explains Clearly and Every Crypto Card Purchase Is Taxable — Even a Coffee.
This article offers general information and my own opinions, not financial, tax, or legal advice. The figures in worked examples are assumed. Laws, tax rules, and products change and can differ by location, so check current official sources and talk to a qualified professional about your own situation.