Reports Say That UK Treasury Will Talk About How To Tax DeFi
The suggested changes to the rules are meant to reduce the “administrative burden” that taxpayers have to deal with.
The UK is getting ready for how lending and borrowing on decentralized finance (DeFi) systems will be taxed. The country’s tax department, HM Revenue and Customs, put out a paper asking for opinions on how to change how DeFi lending and staking are taxed.
After the consultation, a final choice will be made about whether or not to change the law. This is the second step in a five-step process. The next steps are writing the law, putting it into effect and keeping an eye on it, and finally reviewing and analyzing the change.
Taxing DeFi
The main goal of the consultation is to create a system that taxes crypto assets used in DeFi lending and staking in a way that matches their economic value while making it easier for users to deal with paperwork, according to an official press statement.
The government wants to put the country “at the forefront of safe, sustainable, and fast innovation in crypto assets and blockchain technologies.”
So, the tax authority has asked investors, professionals, and firms involved in DeFi activities, such as technology and financial service firms, trade associations and representative bodies, academic institutions and think tanks, and legal, accounting, and tax advisory firms, to give their opinions on the matter by June 22, 2023.
“The government is inviting answers to the questions below on a potential legislative solution which aims at better aligning the taxation of crypto assets used in DeFi transactions with the underlying economic substance. In addition to the specific questions posed, a more general comment on the issues discussed is welcome”
According to the suggested changes to the law, the crypto used in DeFi transactions would no longer be taxed as a sale. Instead, when crypto assets are sold in a non-DeFi deal, the Capital Gains Tax (CGT) would be added to the tax on disposal.
UK Crypto Regulation
Andrew Griffith, who is the Economic Secretary to the UK Treasury, said last week that the government plans to regulate the crypto business in the next 12 months.
The lawmaker said that the future regulation will help the asset class grow and will make the Kingdom a center for cryptocurrency around the world.
