Tax treatment of crypto transactions to be clarified

The government is consulting on modifying the tax treatment of decentralised finance (DeFi) lending and staking. The intention of the consultation is to create a regime that better aligns the taxation of cryptoassets used in DeFi lending and staking transactions with the underlying economic substance while reducing the administrative burden on users.

Currently the law would treat many of these transactions as being chargeable disposals for capital gains tax despite the owner not having actually disposed of their interest in the assets. The proposed new approach recognises that the owner retains an economic interest in their asset. The proposals are to disregard capital gains tax on De-Fi transactions and only apply the tax once the asset is fully disposed of.

Returns received as a form of interest while the asset is in the De-Fi platform will be taxed as revenue and chargeable under a...