UK to tax crypto lending and staking

UK Government is Consulting on Taxing DeFi Assets

The Decentralized Finance (DeFi) ecosystem will soon be the focus of tax authorities in the United Kingdom.

The HMRC is seeking views from investors, professionals and companies on how best to tax DeFi activities. The DeFi ecosystem has experienced massive growth over the past few years, and the government feels it is time to properly tax investors in the market. 

taxation of Decentralised Finance involving the lending and staking of cryptoassets

According to the document published today, the government said it is s seeking views on the taxation of crypto-asset loans and ‘staking’ within the context of DeFi.

The UK government said;

“DeFi lending and staking encompasses a range of activities that reward users who deposit cryptoasset tokens into a pool or lend them to other individuals or platforms for a certain period to earn passive income returns often described as interest. In particular, the government is interested in ascertaining whether administrative burdens and costs could be reduced for taxpayers engaging in this activity and whether the tax treatment can be better aligned with the underlying economics of the transactions involved.”

The government added that it is seeking the input of investors, professionals and firms engaged in DeFi activities, including technology and financial service firms; trade associations and representative bodies; academic institutions and think tanks; and legal, accountancy and tax advisory firms. Those wishing to submit evidence have until Aug. 31 to do so.

According to the UK government, this latest development is part of its initiatives in April 2022 to make the region a global crypto stronghold. 

One of its significant points was conducting major surgery on the taxation system to ensure it becomes easier for firms and investors within the cryptocurrency ecosystem to work.

Following this call for evidence, the government said it would publish a summary of responses and details of its next steps.

The United Kingdom, like many governments around the world, is starting to understand the importance of cryptocurrencies within the global economy. As such, the government is putting in place the necessary structures to ensure it supports innovation and protects investors from the negative aspects of the market. 

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