The UK Treasury is primarily looking for input from the sector on the procedures for taxation of DeFi staking and lending, which might ultimately result in legislation.
As part of a drawn-out process to create legislation governing the taxation of DeFi activities in the future, the UK Treasury’s HM Revenue and Customs division has begun a consultation on DeFi taxes and will continue it through June 22.
As a result, the UK Treasury will examine Decentralized Finance (DeFi) in the country more closely from a tax perspective. The HM Revenue and Customs has requested views and suggestions from the crypto sector and its professionals, investors, and businesses as part of a joint endeavor through the consultation.
If totally disposed of, crypto utilized in non-DeFi transactions would probably be subject to capital gains taxes, but such taxes wouldn’t be applicable to those crypto assets exclusively utilized for DeFi activities like staking and lending.
In an official statement, UK Treasury’s HM Revenue and Customs said, “To reduce the administrative burden for participants, the new tax framework could treat all DeFi returns as being revenue in nature and charged to a new miscellaneous income charge specific for cryptoasset transactions.”
The statement also made clear that the DeFi taxation consultation and any ensuing legislation would not be a substitute for comprehensive regulation of the crypto market. The UK Treasury would seek to improve the way taxes on the crypto assets used in DeFi are structured as part of the policy-making process.
Following the conclusion of the current consultation, the authorities would begin drafting a law containing the suggested changes. After the law is put into effect, they will monitor, check, and assess it.