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UK HMRC plans to defer capital gains tax on crypto DeFi lending and liquidity pool deposits from April 6 2027, affecting up to 700,000 users and simplifying
The UK government will treat deposits into qualifying crypto‑lending and DeFi liquidity‑pool arrangements as “No Gain, No Loss” events, deferring any capital‑gains tax until the underlying asset is economically disposed of, a move aimed at reducing administrative burden for roughly 700,000 individuals and trustees [2].
| At a glance | |
|---|---|
| Policy change | “No Gain, No Loss” CGT treatment for crypto loans & liquidity pools |
| Effective date | 6 April 2027 |
| Affected users | ~700,000 individuals and trustees |
| Catalyst | HMRC draft legislation to align tax with economic reality of DeFi [1] |
HMRC says the current rules can label a simple transfer of crypto into a lending protocol as a taxable disposal, even though investors retain exposure to the same asset. By deferring the gain or loss until a genuine economic disposal occurs, the proposal aligns tax treatment with the underlying economics of DeFi activities [1]. The measure amends the Taxation of Chargeable Gains Act 1992 and follows a consultation that began in 2022 after stakeholders highlighted disproportionate administrative burdens [2].
The “No Gain, No Loss” treatment applies only to qualifying crypto‑asset loans and automated market‑making (AMM) liquidity pools where the investor receives an interest in the same type of crypto they supplied. Borrowed crypto is valued at market price at the time of borrowing, and any collateral is ignored for CGT purposes [2]. The policy is expected to affect about 700,000 UK individuals and trustees who engage in these DeFi transactions, but it does not extend to all crypto disposals such as swaps, sales, or spending [2][4].
The proposal signals a shift toward treating DeFi activities more like traditional finance, reducing immediate tax liabilities and potentially encouraging greater participation in UK crypto markets, while leaving the ultimate fiscal impact to be assessed after implementation.
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AI-assisted synthesis by the TrendWatcher Editorial Desk · sourced from 4 outlets · Jul 19, 2026 · How we report
Crypto Lending generates interest by pooling deposited digital assets and making them available for borrowers to use. Lenders earn interest or crypto dividends on these pooled funds until they choose to remove their assets from the lending protocol.
Crypto Lending carries risks including the absence of federal regulatory protections, potential security vulnerabilities like hacks, and the possibility of platform mismanagement or bankruptcy. Additionally, market volatility can lead to unanticipated margin calls for borrowers.
Centralized Crypto Lending platforms are generally considered more user-friendly and offer customer support, whereas decentralized platforms offer potential for higher returns but involve greater technical complexity and exposure to code-related risks. Both types of Crypto Lending lack the federal protections typically afforded to traditional bank deposits.