UK proposes ‘no gain, no loss’ tax rules for DeFi users
The United Kingdom has outlined a proposed tax framework for decentralized finance that would defer capital gains taxes on crypto lending and liquidity provision until the underlying assets are sold, a move welcomed by industry participants.
HM Revenue and Customs (HMRC) on Wednesday proposed a “no gain, no loss” treatment for certain DeFi activities, including lending a token and receiving the same type in return, borrowing against crypto collateral, and adding tokens to liquidity pools. Under the plan, taxable gains or losses would be determined when liquidity tokens are redeemed, based on the number of tokens a user receives compared with the amount originally supplied.
Under the current rules, depositing assets into a protocol may trigger capital gains tax regardless of purpose. In the UK, capital gains tax rates can range from 18% to 32%, depending on the action.
Industry views on proposed DeFi tax changes
Sian Morton, marketing lead at cross-chain payments provider Relay, said the “no gain, no loss” model represents a meaningful shift for UK users who borrow stablecoins against crypto collateral and aligns tax treatment more closely with the underlying economics of these transactions. She described it as a positive signal for the UK’s evolving approach to crypto regulation.
Maria Riivari, a lawyer at DeFi platform Aave, said the change would clarify that DeFi activity does not create a tax event until tokens are actually sold. She added that other jurisdictions with similar questions may look to HMRC’s approach and the work underpinning it.
Aave CEO Stani Kulechov called the plan a major win for UK DeFi participants seeking to borrow stablecoins against their crypto assets.
Proposal remains subject to further review
HMRC emphasized the proposal is not final and said it will continue discussions with stakeholders to evaluate the merits of the approach and the case for legislative changes governing the taxation of crypto asset loans and liquidity pools. The agency said it aims to ensure any new rules cover the breadth of transactions occurring under these arrangements and remain practical for individual compliance.
In its initial consultation, HMRC received 32 formal written submissions from individuals, businesses, tax professionals and representative bodies, including Binance, a16z Capital Management and CryptoUK.
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