A coin swap (or token swap) happens when an incompatible change is made to a token's underlying technology that requires users to swap the old token for a new one. Typically a user must send the old token to a contract address, and in exchange they receive an equivalent value of the new token. This is different than trading crypto-to-crypto, because the old token is being deprecated in favor of the new one.

Accounting for these swaps can be complicated because they often occur at a different than 1-to-1 ratio. For example, when Elrond swapped their token from being an ERC-20 token on the Ethereum blockchain to using their own native blockchain, they swapped the old tokens (ERD) for new ones (EGLD) at a rate of 1,000-to-1. If you had 5,000 ERD before the swap, you would have 5 EGLD after swapping.

For tax accounting purposes we want to make sure the new token carries the same cost basis as the old one. This article will explain how to do that manually for swaps that haven't been automatically handled by CoinTracker.

In this example transaction we can see 5,000 ERD were purchased for $130 USD. This works out to a cost basis of $0.026 per ERD.

A manual transaction must be added to track the swap from the old ERD token to the new EGLD token:

Now we see the swap transaction, but the cost basis is incorrect and there is a taxable gain. This is because the system has understood this as a trade, rather than a token swap.

To fix this we need to edit both the cost basis and the proceeds for this transaction. Click the drop down arrow next to the transaction and select the option to Edit proceeds from ERD and then Edit cost basis of EGLD, edit both of these to reflect the original ERD cost basis. In this example, that is $130.

When we have completed editing both the proceeds and the cost basis, the token swap is properly recorded in CoinTracker, and the new token shows the same cost basis as the original token.

Other token swaps that have occurred are:

  • EOS (ERC-20 token) → EOS (coin)

  • LEND → AAVE

  • VEND → VETH

  • KIN (ERC-20 token) → KIN (coin)

  • BNB (ERC-20 token) → BNB (coin)

  • Single Collateral DAI (SAI) → Multi Collateral DAI (DAI)

  • RPX → PHX

  • SJCX → STORJ

  • PAC 1,000:1 conversion

  • Shadow Cash → Particl

  • ANS → NEO

Disclaimer: CoinTracker is provided for informational purposes only. This service is not intended to substitute for tax, audit, accounting, investment, financial, nor legal advice. For financial, tax, or legal advice please consult your own professional. The information on CoinTracker is subject to change without notice. All information is provided "as is." CoinTracker disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Please see our full disclaimer.

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