Cashing out crypto & source of funds: How to protect yourself from account freezes

Bitcoin and other coins are at all-time highs—so many are thinking about taking profits. Maybe you’ve already sketched out an exit strategy and are considering converting your coins to euros. If that’s you, we’ve got a separate guide on exit strategies for selling crypto.

Whether you’ve never cashed out before or you’ve done it a few times, one thing is clear: once the amounts get bigger, your bank may start asking questions.

That’s where a term comes up that sounds a bit clunky at first: source of funds (SoF). It simply means: Where does your money come from? Banks and authorities especially want to ensure that crypto proceeds come from a legal source—to prevent money laundering or tax evasion. And it’s not just banks that care: when you send coins to a crypto exchange, they’ll often ask where the assets originated as well.

<div fs-richtext-component="info-box" class="info-box definition"><div class="flex-info-card"><img src="https://assets-global.website-files.com/65098a145ece52db42b9c274/650c6f473db41a468e9c5dc5_Bookmark.svg" loading="lazy" width="64" height="64" alt="" class="icon-info-box"><div fs-richtext-component="info-box-text" class="info-box-content"><p class="color-neutral-800">In this article, you'll learn:<ul><li>what a source of funds (SoF) proof actually is,</li><li>when you need it,</li><li>how to prepare it,</li><li>how to avoid hassle with your bank,</li><li>and how Blockpit can help you!</li></ul></p></div></div></div>

When do you need a source-of-funds (SoF) report?

A source of funds report might sound like a lot of red tape, but your bank or an authority really just wants to know one thing: Where does the money come from?

You’ll typically be asked for it with larger amounts, mainly due to strict anti-money-laundering (AML) and tax-evasion rules.

Common situations:

• You sell crypto and transfer the proceeds to your bank account.
  Especially with high amounts (often from around €10,000), your bank may take a closer look.
  ‍
• You transfer crypto to an exchange to sell it.
  Some exchanges will ask where the coins came from before allowing EUR withdrawals—for example, whether you bought, swapped, or mined them. This ties to AML and KYC requirements.
  ‍
• You receive a large incoming transfer from abroad.
  Banks must scrutinize cross-border payments more closely.
  ‍
• The tax office or BaFin looks into your finances.
  During audits or investigations, a source-of-funds proof is often required. (BaFin = Germany’s Federal Financial Supervisory Authority.)

<div fs-richtext-component="info-box" class="info-box"><div class="flex-info-card"><img src="https://assets-global.website-files.com/65098a145ece52db42b9c274/650c6f4cef4c34160eab4440_Info.svg" loading="lazy" width="64" height="64" alt="" class="icon-info-box"><div fs-richtext-component="info-box-text" class="info-box-content"><p class="color-neutral-800">Important: Selling crypto doesn’t automatically mean you’ve done anything wrong. But the more transparent and well-organized your documentation is, the smoother the entire process will be.</p></div></div></div>

What happens if you can’t provide proof?

If you can’t present convincing documents showing the origin of your money or coins, the consequences can be serious—for example:

• Your bank may freeze your account or hold transfers.
• Withdrawals on the exchange may be blocked.
• The tax office may estimate your gains, often resulting in a higher tax bill.
• In severe cases, fines or even criminal investigations are possible.

That’s why preparation matters—especially when converting larger amounts to fiat.

Which documents may be requested?

It depends on the case—but banks, exchanges, and authorities generally want to see where your money or coins come from. Typical proofs include:

• Pay slips or salary statements
• Tax assessments
• Sales contracts (e.g., property, stocks, vehicles)
• Bank statements
• Crypto transaction histories (e.g., exported from Blockpit)
• Certificates of inheritance or gift agreements
• Proof of mining or staking income

Depending on your situation, your bank or exchange may ask for different documents. What matters is that you can prove the origin of your funds—in fiat or crypto. Which documents help will depend on how you acquired your crypto assets.

Here are the key categories at a glance:

1. Proof of euro (fiat) payments

‍If you invested fiat (e.g., euros) into crypto, keep records such as:

• Bank statements or credit card statements for exchange deposits
• Bitcoin ATM receipts or voucher purchases
• Pay slips, tax assessments, invoices (employment or self-employment)
• Gift/inheritance documents or sales contracts (e.g., property, stocks, gold)

2. Proof for your crypto assets

‍Authorities also want to know where your coins came from. Depending on the case, often sufficient: The better your history is documented, the faster the review.

• Screenshots or transaction histories from wallets and exchanges
• Evidence of crypto income (staking, mining, airdrops)
• Documents for gifts or payments made in crypto
• Documentation of NFT/Ordinals activity

3. Proof of ownership (that the assets are yours)

‍When transferring coins to an exchange, you may need to show the assets belong to you, e.g.:

• Screenshots from wallets/accounts
• Ownership confirmations or signed messages
  Requirements vary by bank/platform—clarify in advance.

4. Taxes: Have your crypto gains been declared?

‍Tax questions can be part of the review—especially for larger inflows. Keep ready:

• Tax returns or assessments showing crypto gains
• Blockpit tax reports as an accepted proof

5. When it gets more complex: help from professionals

Sometimes standard proofs aren’t enough. In such cases, the following can help:

• Forensic data reconstruction (e.g., when wallet access is lost)
• Analysis of self-custody/unhosted wallets for AML risks
• Certification by a tax advisor confirming everything has been reported correctly

How Blockpit Source of Funds helps you

Proving the origin of your funds can quickly become a headache: endless support tickets with exchanges, additional questions from banks, misunderstandings, and long waiting times. And the less crypto-savvy your bank is, the more exhausting the process becomes — sometimes even causing you to miss important market opportunities.

That’s exactly why Blockpit Source of Funds exists: it lets you prove the origin of your crypto in just minutes — with a structured, easy-to-read report built specifically for banks and exchanges.

Important to know: Blockpit reconstructs your entire crypto history — tracing your assets all the way back to the very first fiat or crypto deposit. Depending on the situation, your bank may still request additional documents (such as payslips or tax notices). But the most complex part by far — preparing your full crypto transaction history — is handled for you.

In short: Blockpit Source of Funds brings order instead of chaos, clear evidence instead of endless back-and-forth — and the confidence that your payouts won’t get blocked.

Want to see the report in action? This video shows how it looks and how to create it in Blockpit:

Our Tip: Talk to your bank first

If you plan to transfer larger amounts from a crypto platform to your bank account, it’s worth speaking to your bank beforehand. This helps you avoid delays or additional questions.

Ask specifically:

• Which documents are required for transfers originating from crypto?
• How and when should they be submitted?

Ideally, provide your Blockpit Source of Funds report in advance, before you request the payout. That shows transparency and makes everything smoother.

Extra tip: If you have a personal advisor, even better—ideally someone crypto-savvy who can flag requirements early.

The better you’re prepared, the more smoothly your payout will go.