CMC News

U.K. Proposes Tax Relief for #DeFiLending Activity

British tax authorities have outlined support for deferring capital gains obligations on decentralized finance interactions. HM Revenue and Customs proposed a “no gain, no loss” framework for #crypto lending and liquidity pool arrangements in documents published this week.

Current regulations treat protocol deposits as taxable disposals even when users collateralize holdings or generate yield. The revision would postpone tax obligations until users execute actual economic disposals through sales or trades realizing gains or losses.

Practically, users depositing crypto into lending protocols or contributing tokens to automated market makers would avoid immediate taxation. Tax liability would trigger only when eventually selling or trading assets in ways that produce genuine economic outcomes.

#Aave CEO Stani Kulechov welcomed the development, calling HMRC's recognition that DeFi deposits are not disposals a major victory for U.K. users. The company supports the approach and hopes to see changes reflected in legislation soon.

The proposal aims to align tax treatment with how decentralized finance actually operates. Current rules create administrative burdens and tax outcomes disconnected from economic reality within the sector.

The framework would also cover complex multi-token arrangements used in decentralized protocols. Users receiving more tokens back than deposited would face taxation on gains, while those receiving fewer would claim losses.