UK Overhauls DeFi Taxation: ’No Gain, No Loss’ for Crypto Lending and Liquidity Pools
The U.K. government has taken a significant step toward modernizing its tax treatment of decentralized finance (DeFi) activities. Under new guidelines from HM Revenue and Customs (HMRC), users will no longer trigger capital gains taxes simply by depositing tokens into lending protocols or liquidity pools.
The revised framework adopts a 'no gain, no loss' approach, aligning tax events with actual economic outcomes rather than technical token movements. This eliminates the current burden where DeFi participants faced tax liabilities for deposits treated as disposals, despite maintaining exposure to the same assets.
The changes follow extensive consultation with industry leaders including Aave, Binance, and major accounting firms. Market participants had long argued the existing rules created unnecessary complexity and distorted economic behavior in the burgeoning DeFi sector.
