HMRC is considering options to modify the tax treatment of crypto assets used in decentralised finance (DeFi) lending and staking transactions.

Under the proposed changes, the use of crypto assets in DeFi transactions would no longer be treated as giving rise to a disposal for tax purposes, which usually triggers a capital gains tax (CGT).

Instead, CGT would apply when the crypto assets are disposed of in a non-DeFi transaction – however, they must meet certain criteria to be considered.

For example, it should involve the initial transfer of crypto assets from a lender to a borrower, or through a smart contract, with the borrower being obligated to return the tokens.