News

UK Proposes Stricter Taxes On DeFi, How Does It Impact Stakers & Investors?

The new proposal shared by the UK Tax Authority will majorly target DeFi activities such as staking and lending operations.
Published by
UK Proposes Stricter Taxes On DeFi, How Does It Impact Stakers & Investors?

Crypto News: According to an announcement made on Thursday, the tax authority in the United Kingdom is soliciting feedback from the general public regarding a possible change to the tax treatment of decentralized finance’s (DeFi)  two most prominent products – lending and staking. It would no longer be considered a disposal for tax purposes when digital assets are used in DeFi transactions. Instead, a taxable disposition will take place once the cryptocurrencies are economically sold off through a transaction that is not related to DeFi.

Advertisement

UK Tax Dept Aims DeFi Lending & Staking

In accordance with current regulations, DeFi transactions may be viewed as disposals and accounted as sales or gifts by crypto lenders or yield generators like liquidity providers even when the asset’s ownership remains unchanged.

Read More: US Sen. Ted Cruz Reveals Bitcoin Investment Strategy, Declares Ultra-Bullish Outlook

According to the document that was used for the consultation, this can result in “tax outcomes that do not reflect the underlying economic substance”, as well as a tax liability resulting from a “transaction in which no gain has been realized in a form that can be used to meet the liability”.

Advertisement

Growing Scrutiny Over Crypto Failures

Recent failures in the crypto market, such as the closure of the FTX exchange, bankruptcies of crypto lending giants like BlockFi & Celsius, were cited as the primary reasons for the authority’s increased scrutiny in the industry. While speaking on recent crypto news of financial failures, HM Revenue and Customs (HMRC) was quoted as saying:

There has been a highlighted specific risks including cyber risks and other technical risks, as well as increased dependencies between traditional and decentralized financial systems and a lack of backstops in periods of market stress.

“The need to determine and record the market value of assets at each step in the transaction may also give rise to a disproportionate administrative burden.” HMRC further outlined.

According to the document, even though the proposed framework is aimed at decentralized finance (DeFi) lending and staking, it is also unequivocally applied to centralized finance (CeFi), which offers similar services often through intermediaries. The consultation will be available for a total of eight weeks before coming to an end on June 22.

Also Read: Cardano Price Surges While Altcoins Shrink; Here’s Why

Advertisement
Share
Pratik Bhuyan

Pratik has been a crypto evangelist since 2016 & been through almost all that crypto has to offer. Be it the ICO boom, bear markets of 2018, Bitcoin halving to till now - he has seen it all.

Published by
Why trust CoinGape: CoinGape has covered the cryptocurrency industry since 2017, aiming to provide informative insights to our readers. Our journalists and analysts bring years of experience in market analysis and blockchain technology to ensure factual accuracy and balanced reporting. By following our Editorial Policy, our writers verify every source, fact-check each story, rely on reputable sources, and attribute quotes and media correctly. We also follow a rigorous Review Methodology when evaluating exchanges and tools. From emerging blockchain projects and coin launches to industry events and technical developments, we cover all facets of the digital asset space with unwavering commitment to timely, relevant information.
Investment disclaimer: The content reflects the author’s personal views and current market conditions. Please conduct your own research before investing in cryptocurrencies, as neither the author nor the publication is responsible for any financial losses.
Ad Disclosure: This site may feature sponsored content and affiliate links. All advertisements are clearly labeled, and ad partners have no influence over our editorial content.

Recent Posts

  • News

Analyst Slams S&P’s ‘B-’ Rating for Strategy Inc, Says Bitcoin Treasury Model Is “Misunderstood”

Crypto market analyst Adam Livingston has sharply criticized S&P Global Ratings after the agency assigned…

October 28, 2025
  • News

Metamask Airdrop Countdown Begins as Wallet Team Registers Token Claim Domain

In a fresh development, a newly registered claim domain has led to speculations that the…

October 27, 2025
  • News

$2.5T Citigroup Partners With Coinbase to Enable Stablecoin Payments

Citigroup, a top U.S. bank with $2.5 trillion asset under management has partnered with Coinbase.…

October 27, 2025
  • News

Who Will Be the Next Fed Chair? Scott Bessent Confirms Final Five Candidates

U.S. Treasury Secretary Scott Bessent has confirmed the final shortlist of contenders to replace Jerome…

October 27, 2025
  • News

Mt. Gox Delays Repayments to 2026 as Trump-Backed American Bitcoin Adds 1,414 BTC

Mt. Gox has once again pushed back its long-awaited Bitcoin (BTC) creditor repayments by a…

October 27, 2025
  • News

Crypto ETFs Attract $1B in Fresh Capital Ahead of Expected Fed Rate Cut This Week

Crypto ETFs record nearly $1 billion in weekly inflows. This marks one of the strongest…

October 27, 2025