Source of crypto from staking or mining: how to prove it
Date: | Week 43 | Reading time: 7 minutesAuthor: Simcha Schrijver
In brief
Proving the source of crypto from staking or mining works differently from crypto you bought. There is no purchase and no payment from your bank account showing where it all started. Even so, a lot can usually be traced, on the blockchain and in your own records.
As an independent expert firm, Paucitas handles hundreds of cases a year, including many questions about the source of crypto wealth. Paucitas maps out the rewards, the wallets and the route to your bank account, in a report anyone can follow step by step.
Has your bank or solicitor asked for evidence? Get in touch with Paucitas. A free intake comes with no obligation.
Put simply
Crypto from staking or mining has no proof of purchase, but its source can often be evidenced well. Not sure what your bank needs? Ask Paucitas.
You have been staking crypto for years, or mining it yourself. Now you want to sell some of it, perhaps for a house purchase or a renovation. Then your bank asks: where has this come from? Your statement only shows small rewards, or amounts from an address you do not recognise. That can feel unsettling. It happens regularly, and there is usually more to find than you think.
Why is your bank asking about the source of crypto from staking?
In our experience, questions about the source of funds usually come from a bank or the tax authorities. A solicitor or conveyancer handling a property purchase, a mortgage lender or an accountant may ask too. That does not mean anyone is accusing you of anything. It is usually a routine check.
Under the Money Laundering Regulations 2017, banks and other firms must know their customers and, where needed, look into the source of funds (legislation.gov.uk, regulation 28). With crypto that question is often harder to answer than with ordinary savings, which is why they ask for more evidence. HMRC also expects you to keep records of tokens you receive, including the date and their value in pounds sterling (gov.uk, tax when you receive cryptoassets).
Why is staking or mining harder to evidence than a purchase?
With crypto you bought, there is a clear starting point: a payment from your bank account to an exchange. With staking and mining that is missing. Rewards arrive in small amounts, sometimes every day, sometimes over many years. Mining rewards often come from a mining pool, staking rewards from a platform or straight from the network.
To a bank, that can quickly look unclear. There are lots of small amounts in a wallet, with no name or description. Perhaps the platform you started on no longer exists, or your old equipment is long gone. That is no cause for worry. Even then, the route can often be reconstructed well. You can read more in our blog on reconstructing crypto history when an exchange has gone.
What does a Paucitas source of funds report show for staking or mining?
Every report is tailored, but these four parts nearly always feature:
- The starting point. What you began with: the crypto you once bought to stake, or the equipment you started mining with, and when.
- The rewards. When they came in, how much, and from which platform, pool or network, clearly set out per period.
- Ownership. Which wallets, addresses and accounts are yours, and how that is shown.
- The route to today. From reward to exchange and bank account, with the value at each point, so the growth can be followed.
Paucitas does more than follow transactions. Paucitas reads through all the documents, emails, conversations and other communication you have, such as confirmation emails from a platform, invoices for equipment, electricity bills and messages with a pool. That gives a complete picture, with a timeline and, step by step, where the wealth came from and where it went. Would you like to know what this means for your situation? Get in touch and we will think it through with you.
An example from practice
A client had been staking crypto from his own wallet since 2021 and wanted to sell part of it for a renovation. After the first transfer from his exchange, his bank asked where the balance had come from. His statement only showed incoming amounts from an address he did not recognise. Paucitas linked his original purchase to his bank statements, mapped the rewards month by month and followed the route on the blockchain to his exchange account. With the report, the bank was able to close the file.
Paucitas values privacy and never shares clients' personal details. This is a composite example: names, amounts and details differ. The situation is, however, one we see in practice.
What can you do with the Paucitas report?
The report shows where your wealth came from, which route it took and what the next steps could be. You can use it with your bank, with your solicitor or conveyancer when buying a home, with a mortgage lender or with your accountant. The report is written so that anyone can follow and understand it step by step. You can read more about how it is put together in our blog on proof of source of funds, and about a payout to your account in exchange payout: proving the origin.
Paucitas does not give tax advice. How staking or mining is treated for tax depends on your situation. Paucitas provides the evidence; you or your adviser deal with the tax return, using the report as a basis.
Why do people choose Paucitas?
With a source of funds question, you want a firm you can trust. That is why Paucitas is fully transparent. Paucitas is an expert firm based in the Netherlands, founded in 2021 and registered with the Dutch Chamber of Commerce under number 83489649. Our company details are public, you are welcome to visit our office and you can read our clients' Google reviews on our site. Paucitas handles hundreds of cases a year, and Simcha Schrijver has more than ten years of experience with crypto.
How does Paucitas work and what can you expect?
Paucitas does all tracing itself, without tracing tools. You send what you have; it does not need to be complete, and we help you gather the rest. You can share documents digitally or at our office. An investigation takes from the same day to about two weeks. Every investigation is tailored: you receive a bespoke quote in advance that we go through together, with no surprises.
You can always call, 24/7, on +31 20 244 5774. Through the contact form you will hear from us within 1 to 3 hours, and we answer emails within 24 hours, usually the same day.
Sources: legislation.gov.uk, Money Laundering Regulations 2017, regulation 28; gov.uk, tax when you receive cryptoassets.
Questions about your own situation?
Call us directly, 24/7. The first conversation is always free of obligation.
Frequently asked questions about the source of crypto from staking
Do I need to prove the source of crypto from staking or mining?
Paucitas sees banks and solicitors ask for it regularly, especially when you move a larger sum to your account or buy a home. It is usually a routine check, not an accusation.
My exchange statement only shows rewards. Is that enough?
Paucitas explains: sometimes, but often not. A statement shows what came in, but not always what you started with or that the wallets are yours. Paucitas first looks at what is already there and what is still missing.
I mined crypto years ago. Can that still be shown?
Paucitas finds in practice that there is often more to trace than you think, through the blockchain, old emails, invoices and bank statements. Paucitas tells you honestly in advance what is possible.
Does Paucitas also give tax advice on staking?
Paucitas does not give tax advice. Paucitas provides the evidence of the source. You or your adviser deal with the tax return, using the report as a basis.
How quickly can Paucitas help and what does it cost?
Paucitas completes an investigation within the same day to about two weeks. You receive a bespoke quote in advance, with no surprises. You can always call, 24/7.
Do you have questions about this blog?
Feel free to get in touch with Paucitas. Paucitas can be reached by phone 24/7, including evenings and weekends. Through the contact form we usually reply within 1 to 3 hours, and we answer e-mail within 24 hours.
From Amsterdam, for the whole of the UK
Everything can be done fully online. Prefer to meet in person? You are very welcome at our office in Amsterdam, by appointment.
Paucitas is an independent expert firm based in the Netherlands that, for clients across the UK, investigates investment fraud and crypto fraud, establishes the origin and legitimacy of crypto assets and prepares expert reports for legal proceedings and compliance.
Your own situation
If you are reading this, you probably have a question about your own situation. That is exactly what Paucitas does.
The first step is contact by phone. You can book that call by phone or through the contact form, so you do not have to wait. In the call we look together at what can factually be established in your case and what Paucitas can examine for you.