In April 2022, the government announced a package of measures intended to make the UK a global cryptoasset technology hub. One of the issues raised at the time concerned the tax treatment of Decentralised Finance (DeFi) and staking.
DeFi lending and staking 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 certain period to earn passive income returns often described as interest.
The government was interested in ascertaining whether the administrative burdens and costs could be reduced for taxpayers engaging in this activity, and whether the tax treatment can be better aligned with the underlying economics of the transactions involved.
As part of the process, the government ran a Call for Evidence from 5 July to 31 August 2022. Most respondents agreed that a change in the tax rules would be beneficial for the industry and users.
A new consultation seeking views on a potential new taxation framework for cryptoasset loans and ‘staking’ in the context of DeFi was published on 27 April 2023 and represents the next stage of the policy making process. The consultation closes on 22 June 2023.