When a volume of assets is transferred from one wallet to another, this is an Internal Transfer. In traditional fiat banking, we consider something an internal transfer when we transfer funds between accounts, for example, if I sent $100 from my Capital One Current Account to my HSBC account.

On Cryptio, an internal transfer is a transaction that happens when a crypto-asset and original cost basis have moved from one imported wallet to another. Internal Transfers don't have any gains/losses computed as the assets haven't left the owner's treasury.

By definition, these are non-taxable events and there’s no tax liability. For most internal transfers, Cryptio identifies them automatically.

Internal Transfer Criteria

At Cryptio we want to make it as easy as possible to identify internal transfers, to ensure your books are accurate and only include what they need to. That’s why we have built our system to automatically detect and label internal transfers for you.

The following must be true in order for a transaction to automatically be labeled as an internal transfer:

1. Both wallet sources are imported into the workspace on Cryptio
2. Volumes in the 2 movements need to match exactly
3. Assets in the 2 movements need to match (e.g. USDC and USDC)
4. The out transaction must have happened before the in-transaction
5. The 2 movements must have happened within a maximum of 6 hours of each other

If the above is true, then our system will automatically label the transactions as an internal transfer. If you have a pair(s) of transactions that you believe are internal transfers, but don’t meet one or two of the above criteria, please reach out to Customer Support.

Does Cryptio book Internal Transfers?

As internal transfers show the movement between your own wallets, we don’t automatically synchronize these with your chosen accounting software. This is because there is no need to from a tax-audibility perspective.

⚠️ Please note, booking both sides of the transaction will lead to duplicate entries in your accounting software

However, if you would like to book them, we recommend only booking the outgoing transaction, and only if it has a fee. To do this:

1. Head to your Needs Review module and click on “Ready to be Synced”
2. Add filters. One should be “Internal Transfer Status” > Is > “Internal Transfer,” and the other should be “Order Type” > Is > “Outgoing”
3. Select these filtered transactions by ticking the check box at the top of the Transactions table
4. Click “Edit” and select “Synchronize transactions with Xero/Quickbooks/Netsuite/etc.”

These should now show as synchronized, and you’ll be able to see them in your accounting software

Currently, you will see the incoming part of the internal transfer in the “Needs Review” module. These will usually appear in the “Ready to be Synced” tab. As mentioned, please do not synchronize these transactions with your accounting software. Instead, you can easily hide them from this view:

1. Go to your Needs Review module and click on “Ready to be Synced”
2. Add filters. One should be “Internal Transfer Status”> Is > “Internal Transfer,” and the other should be “Order Type” > Is > “Incoming”
3. Select these filtered transactions by ticking the check box at the top of the Transactions table
4. Click “Edit” and select “Hide from Ready to be Synced view”

These will now never appear in the “Ready to be Synced” tab. Please note, that they will still have the red error symbol to show that synchronization has failed, but this can be ignored.

Needs Review Module: Potential Internal Transfers

If there are transactions that our system suspects are internal transfers, they will appear in the Needs Review module under Potential Internal Transfers. To review these, please:

1. Click on “+ Add Label”
2. Under Non-taxable event, select Internal Transfer
3. Read the two prompts that appear and select them if you’re happy to proceed
4. The suggested transaction counterparty, or counterparties if there is more than one that matches, will appear at the bottom of this box. Select the correct counterparty.

Congratulations! You have now matched the internal transfers. Please work through the list one by one.

FAQ:

Q: What if I think there are internal transfers that have been missed?

A: First, please ensure you have imported both sources into your workspace if you own them. If you have reviewed the criteria and the transactions meet the requirements, please get in touch with Support and we’ll look into these further.

Q: There are internal transfers that have been automatically labeled by the system that I don’t agree with. What do I do?

A: Please get in touch with our Support team and we can look into this for you.

Q: I have some bridge transactions, so the assets in the incoming and outgoing movements are different. What do I do?

A: At present, we would not qualify these as internal transfers, as technically they are swaps from one asset to another. Please get in touch if you would like more help with this.