For unfortunate crypto investors looking to turn lemons into lemonade, experts told Cryptooshala, it turns out that digital assets lost during an exploit or hack could potentially be claimed as a tax loss if you live in the right country.

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Following the news that over 8,000 Solana wallets were compromised and that rated $8 million in crypto was stolen due to a security breach on the network of wallet provider Web3 Slope, this may be a much-needed consolation.

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In a correspondence with Cryptooshala, Shane Brunett, CEO of Australia-based CryptoTaxCalculator, confirmed that a cryptocurrency lost through a hack or exploit could be declared a loss for tax purposes in certain jurisdictions.

“This means that the original amount you paid for the asset(s) can be used to offset other capital gains.”

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When asked if similar provisions exist in tax jurisdictions other than Australia, Brunette, the country in which the tax software provider is based, replied:

“Many countries have a provision allowing these types of tax deductions. […] however, you should work closely with your local tax professional to make sure you have sufficient proof of the loss.”

Danny Talwar, head of Koinly’s tax office, confirmed this to Cryptooshala, stressing, however, that in Australia, proof must be provided that the lost cryptocurrency was in their control at the time it was stolen.

“In order to claim damages for a hacked cryptocurrency, you need to provide the Australian Taxation Office (ATO) with evidence that the cryptocurrency was lost and was under your control.”

Talwar also stated that it is critical that the tax authority has enough evidence that the cryptocurrency is irretrievable, suggesting using blockchain research tools such as Etherscan and Solscan for legitimate proof of a hacker’s destination address, which can also provide proof of a large pool of hacked funds.

Under Australian tax law, any evidence of a breach must also include the dates the private keys were obtained or lost and any associated wallet addresses.

Solana wallets ‘compromised and abandoned’ as users warn of scam solutions

Unfortunately, for US crypto investors, claiming a cryptocurrency hack as a tax loss is no longer out of the question. possible due to the tax reform introduced in 2017, according to the CryptoTaxCalculator blog post.

For those who live in the UK and Canada, things are a little more complicated, but a tax loss claim is possible if investors are willing to go through the unique steps set by each country’s tax office.

This year alone, hackers and attackers have lost an estimated $2.6 billion of digital assets, with 69% of the total loss due to cross-network bridge attacks.