Binance USD (BUSD) is a fiat-collateralized stablecoin, issued by crypto giants Binance and Paxos. BUSD is pegged at a 1:1 ratio with the US and is a top 10 cryptocurrency by market cap. Although your BUSD functions the same as a dollar - it’s still a crypto asset from a tax perspective and therefore you might have a surprise tax bill in store. Don’t worry, Koinly can help you calculate taxes for BUSD and more than 400,000 other ERC-20 tokens. Here’s how.
It doesn’t matter that BUSD is a stablecoin from a tax perspective, it’s still a crypto asset and therefore Capital Gains Tax or Income Tax may apply. See our crypto tax guides for specific information about crypto tax where you live but, generally speaking, here’s when you may pay tax on BUSD:
BUSD is a top 10 cryptocurrency by market capitalization, so it’s highly likely the IRS has taken an interest. But can the IRS track BUSD?
Blockchains, other than private blockchains like XMR, are public ledgers. That means anyone, including the IRS and other tax offices, can search and find transactions relating to a specific public address. From here, all the IRS needs to do is link your identity to a particular wallet.
There are a couple of ways the IRS collects user data to track cryptocurrency transactions. One of the most common is to issue John Doe summons to centralized crypto exchanges to compel them to share customer data. This data potentially includes your personal details like your name and address, as well as details on any wallets you’ve transferred to using a centralized crypto exchange.
As well as this, many centralized crypto exchanges issue what’s known as a 1099 form - a form that reports income from sources other than your employer. Binance and Paxos issue BUSD, and both of them issue 1099 forms. You may receive a 1099 form if you’re earning over a certain amount in BUSD or another cryptocurrency, or if you’ve traded a certain volume of crypto. Whenever you get a 1099 form, the IRS gets an identical copy. You can learn more about how the IRS tracks crypto, here.
The exact steps involved in calculating and reporting your BUSD taxes will all depend on where you live and your tax office. Generally speaking, you’ll need to report any gains, losses, or income from BUSD investments as part of your annual tax return.
To do this, you need to identify each taxable transaction of BUSD - so this includes every single time you sold, swapped, or spent BUSD, as well as any time you earned BUSD. You’ll then need to calculate any gains or losses - even if they’re tiny - as well as the fair market value of any income from BUSD in your fiat currency on the day you received it.
For active investors, this takes hours, which is why most investors opt to use a crypto and BUSD tax calculator like Koinly. Koinly can calculate your gains, losses, and income for hundreds of thousands of coins and tokens - including BUSD.
All you need to do is connect your blockchain to Koinly and it’ll do the rest. Here’s how.
To import your BUSD transactions into Koinly, you’ll need to connect each Ethereum wallet you use to interact with BUSD to Koinly.
This is really easy to do, you just need your public address from each blockchain - but remember, you’ll need to do this for each wallet you use to interact with BUSD in order for Koinly to correctly identify your cost basis, transfers, sales, swaps, and more.
You can find steps on how to connect a variety of popular wallets to Koinly on our integration pages, but here’s an example of how it generally works.
1. Remember, you’ll need to do this for every wallet you use to interact with BUSD (and any other tokens!) in order to calculate your crypto taxes correctly. As BUSD is available as a wrapped token on other blockchains, you’ll need to add your public address to Koinly from each blockchain (and wallet!) in order to import your complete Binance USD transaction history.
2. It’s really helpful to name your wallets when you’re adding them to Koinly. If you need to troubleshoot later on, it can help you identify and fix issues much faster!
3. You may also be able to upload your transaction history to Koinly as a CSV file instead of connecting using your public address if you prefer, but this depends on the wallet you’re using. You can search for your wallet on our integration pages to find out more about how to get a CSV file from your wallet.
We’ve got plenty of help at hand if you’re having any trouble connecting to Koinly:
Sign up free today to calculate your BUSD taxes
Binance USD (BUSD) is a fiat-collateralized stablecoin, pegged to the US dollar at a 1:1 ratio and backed by fiat reserves, issued by Binance and Paxos. It is a top 10 cryptocurrency with a market capitalization of more than 10 billion.
You can buy BUSD on centralized crypto exchanges like Binance, as well as swap other tokens for BUSD on a variety of decentralized crypto exchanges.
BUSD is a fiat-collateralized stablecoin, meaning every BUSD issued is backed by $1. BUSD holds reserves in both cash and US treasuries.
Stablecoins like BUSD are a popular investment as their price volatility is reduced. However, BUSD has recently depegged due to confusion over regulatory issues in the US. Investors always should do their own research before investing and know the risks.
Yes. BUSD is a stablecoin, pegged to the US dollar at a 1:1 ratio and collateralized by reserves made up of cash and US treasuries.
Yes, BUSD has struggled to maintain its peg recently after the SEC triggered a bank run by issuing a notice to Paxos alleging that BUSD was an unregistered security and the NYDFS ordered Paxos to stop minting new BUSD.
BUSD is an ERC-20 token issued on the Ethereum blockchain, however, there are also wrapped versions available on other blockchains, like Binance Smart Chain.
The total supply and circulating supply of BUSD at the time of writing is more than 10 billion, but this number is decreasing in light of regulatory notices from the SEC and NYDFS.
Yes, Paxos state BUSD is 100% backed by reserves, either in cash or US treasury bills, and release BUSD monthly reserves holding reports to aid transparency.
BUSD is currently a top 10 cryptocurrency and widely adopted stablecoin… however, in light of recent regulatory issues, it’s unclear what the future may hold for BUSD. Investors should do their research before investing to ensure they understand the risks involved.
You can stake BUSD through centralized crypto exchanges like Binance Earn or stake your BUSD through decentralized protocols.
Many investors flocked to invest in BUSD in light of the lack of transparency from USDT and in the wake of the collapse of UST, as BUSD benefits from the Binance branding and is issued by two reputable crypto companies. However, in light of the recent regulatory issues with BUSD, many investors have been switching to USDT, USDC, and other stablecoins that aren’t under fire from the SEC.
Yes. Despite being pegged to the dollar, BUSD is a crypto asset and taxable as a crypto asset, This means you may need to pay Capital Gains Tax on any gain when you sell, swap, or spend BUSD, as well as Income Tax any time you’re seen to be earning BUSD - for example, from staking rewards.
This entirely depends on where you live. For example, US investors should report every single transaction where they sold, swapped, or spent BUSD to the IRS in Form 8949 and Schedule D.
Yes, stablecoins are taxable in the same way that other cryptocurrencies are. Any gains, however minimal, from selling, swapping, or spending stablecoins are generally subject to Capital Gains Tax.
No, stablecoins do not offer any specific tax advantages compared to other cryptocurrencies. This said, using stablecoins can help minimize any potential taxable gain from spending crypto as your cost basis will theoretically remain the same from the point you purchase to the point you spend it.