The new guidance focuses on how a return from lending or staking is taxed depending on whether it is considered capital or income and stresses that crypto investors have to differentiate this when reporting to HMRC.

HMRC also clarified that investors need to distinguish whether their ‘return was earned by the lender/liquidity provider or was the return realised from the capital growth of an asset owned by the lender/liquidity provider’.

HMRC noted that because of the complexity of DeFi systems, this may not always be clear, so the department gives some factors for crypto investors to look at when determining their tax status.