UK tax agency new rules on Defi lending and staking

The tax department of the United Kingdom released its new guidelines on the earnings generated from staking and lending of crypto assets. 

With the increasing adoption of the crypto industry, the majority of the government authorities are eyeing to bring their new rules to grab huge earnings from this industry and also with new rules they are trying to keep the users away from this market. 

On 2 Feb, The UK Tax agency Her Majesty’s Revenue and Customs (HMRC) released its new crypto tax guidelines by targeting the earnings generated through staking and lending of crypto assets. The majority of the traders criticized such rules and claimed that the UK Agency wants to hit a hammer on the industry so that they can bring a barrier for newcomers to think twice before getting into crypto. 

As per new rules, no one Digital asset is currency under UK laws, so the earnings through the staking and investment returns in any kind of Defi protocols will not be considered as interest. 

“The lending/staking of tokens through decentralized finance (DeFi) is a constantly evolving area, so it is not possible to set out all the circumstances in which a lender/liquidity provider earns a return from their activities and the nature of that return. Instead, some guiding principles are set out,” UK tax agency updated

Under these newly updated rules, many crypto traders claimed that such rules are trying to bring huge confusion, and also these rules are controversial. Besides such people, few experts noted that under the new proposed rule of tax on crypto Defi protocol earnings, crypto users needed to pay tax in the capital gain on its earnings. 

The executive director of CryptoUK, Ian Taylor, shared his stance on the new decision and claimed that it will be additional pressure on the crypto community. Also, he noted that such rules are not imposed on stock market investors. Taylor tried to hint that Security/shares are not Currency but still, no such Captial gain on lending the shares tax rules exist. 

He stated: 

“HMRC treats crypto assets as property for tax purposes. However, this is inconsistent with the approach currently being adopted by Government and other regulatory bodies in the UK, including the Treasury and the FCA”

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