Home Blockchain UK opens consultation on taxation of DeFi transactions

UK opens consultation on taxation of DeFi transactions

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  • The UK Treasury has outlined tax changes for DeFi lending and staking.
  • The proposal is part of a discussion on taxing activities conducted with crypto assets in DeFi.
  • The new changes will also apply to cryptocurrency lending and staking transactions on the Centralized Finance (CeFi) platform.

HM Treasury, the UK’s Ministry of Economy and Finance, has announced a public consultation on the taxation of decentralized finance (DeFi) activities.

Around Publication The consultation, announced by the government on Thursday, April 27, 2023, seeks public input on tax reforms to accommodate crypto-related lending and staking, two key activities in the DeFi industry. is.

The purpose of the consultation is to help shape the UK cryptocurrency tax regime, which will cover DeFi lending and staking.Increase alignment with underlying economics while reducing administrative burden for users‘ wrote the UK Treasury.

As such, HMRC is seeking feedback from key stakeholders in the DeFi space, including technology and financial companies, investors and experts working in DeFi. We also invite industry associations, academic institutions, law firms, and tax advisory firms to participate.

Crypto tax framework also targets CeFi

The government also said the consultation aims to explore legislative changes to the overall tax treatment of lending and staking in the industry. HM Treasury said the change includes a proposal to use cryptocurrencies in DeFi transactions.no longer be treated as giving rise to tax penalties

Rather, tax disposals only occur when taxpayers economically dispose of crypto assets via non-DeFi transactions. The Ministry of Finance added in the announcement:

Although the focus of this document is DeFi lending and staking, the proposed tax framework outlined below is intended to also apply to cryptocurrency lending and staking through intermediaries. . Some industry insiders refer to these arrangements as centralized finance (CeFi).

HM Treasury’s consultation paper comes amid growing recognition within government agencies that as the industry grows rapidly, there is a need for a sound and clear regulatory approach to cryptocurrencies.

Proposal is likely to form a major part of the UK Crypto tax guidelines In 2024, the EU cryptography law MiCA will come into force.

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