UK Proposes Deferred Taxation for Crypto Lending and DeFi

The UK's HM Revenue & Customs (HMRC) has proposed new tax rules for cryptocurrency lending and decentralized finance (DeFi) transactions. The proposed 'No Gain, No Loss' treatment aims to defer capital gains tax until an investor actually sells their assets.

Currently, transferring cryptocurrencies into certain lending protocols or liquidity pools can trigger an immediate Capital Gains Tax obligation, even if the investor has not converted their crypto into cash or exited their market position. The new proposal seeks to address this issue by treating these transactions as 'no gain, no loss' until an actual economic change occurs.

HMRC is inviting technical feedback from industry experts and market participants on the proposed rules, which are scheduled to take effect on April 6, 2027. The government's goal is to create a clearer regulatory environment for investors and trustees, who have faced uncertainty about how DeFi activities are taxed.