Taxation of cryptoasset loans under review

HMRC is consulting on potential options for reform of the tax treatment of cryptoasset loans and ‘staking’ in the context of decentralised finance (DeFi). This encompasses a range of activities that reward users who deposit cryptoasset tokens into a pool or lend them to other individuals or platforms for a period to earn passive income returns often described as interest.

The document notes that the tax system can treat DeFi loans and staking as disposals for capital gains tax purposes. However many users consider that when they lend or stake their tokens they retain ownership and will recover those same assets in due course so they question whether they should be regarded as disposing of the assets and realising a chargeable gain or loss.

To address this the consultation document outlines the following potential options:

• Option 1 – bring DeFi lending and staking within the...