• The UK’s HM Treasury has outlined tax policy changes targeted at DeFi lending and staking.
• The proposals are part of a consultation on taxation of activities conducted using crypto assets in DeFi, as well as CeFi.
• HM Treasury is looking for feedback from key stakeholders within the DeFi space to help formulate a crypto tax regime for the UK.
UK Treasury Opens Consultation on Taxation of DeFi Lending and Staking
The UK’s HM Treasury has outlined tax policy changes targeted at decentralised finance (DeFi) lending and staking. These proposed changes are part of an open consultation on taxation of activities conducted using crypto assets in both decentralised finance (DeFi) and centralised finance (CeFi).
The objective of this consultation is to better align the underlying economic substance with taxation, while reducing the administrative burden on users. To help formulate a crypto tax regime for the UK, views from key stakeholders such as tech and financial firms involved in DeFi, investors, trade associations, academic institutions, legal firms, and tax advisory firms are sought.
The proposed changes involve treating the use of cryptocurrencies in DeFi transactions “no longer as giving rise to a disposal for tax purposes” but rather when taxpayers economically dispose their crypto assets via non-DeFI transactions only. This means that disposals will no longer arise when engaging in lending or staking activities through either DeFI or CeFI platforms.
This consultation seeks to ensure that taxation related to Decentralized Finance (DeFI) activity remains aligned with economic substance while reducing administrative burden on users participating in these activities. It also looks to apply its proposed framework to both Decentralized Finance (DeFI) and Centralised Finance (CeFI).