UK Sets Stage for Landmark DeFi Tax Reform With “No Gain, No Loss” Policy
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On November 27, the UK proposed a new tax policy governing its decentralized finance (DeFi) space, with a particular focus on lending and liquidity pool arrangements.
HMRC Introduces “No Gain, No Loss” Approach for DeFi Transactions
His Majesty’s Revenue & Customs (HMRC), the UK’s leading tax and compliance enforcement agency, published a proposal describing a “no gain, no loss” approach towards collecting taxes on DeFi transactions.
https://twitter.com/0xbenharvey/status/1994033543299624992?s=46
The policy looks to defer capital gains taxes on crypto lending and liquidity pools until users sell their underlying tokens and make actual gains.
According to the proposal, taxable losses or gains will be calculated whenever a user redeems their tokens, with the calculation being done based on the number of tokens the user receives compared to the number they deposited initially.
This would be a considerable departure from the currency tax system, which imposes taxes whenever a DeFi user makes a deposit into a protocol — even if to monetize the funds or take a loan against them.
Considering that capital gains taxes in the UK range between 18% and 32% depending on the nature of the transaction, a deferment could ease the tax burden on DeFi users significantly.
Industry Players Welcome Step Forward as Global DeFi Regulation Expands
This latest development has been welcomed by experts and analysts in the industry.
Stani Kulechov, the chief executive of DeFi lending platform Aave, described the proposal as a major win for the growing sub-industry, which appears poised for even more growth in 2026 with the prospect of new investment coming in.
https://twitter.com/StaniKulechov/status/1994023031702761736
HRMC’s document confirmed that the agency continues to consult with industry and tax professionals in a bid to build out the rules’ mechanics.
Taxation has always been a major sticking point when it comes to crypto, and HMRC will be looking to avoid missteps as it hopes to bring more clarity on its home front.
Nevertheless, this marks a serious step in the right direction, especially as other jurisdictions continue to expand crypto oversight in their own way.
Earlier this month, the United Arab Emirates (UAE) published Federal Decree Law No. 6 of 2025, a new financial law that brings both web3 and DeFi under the control of the region’s central bank.
Amongst other things, the decree postulates two key provisions — Articles 61 and 62 — which outline activities that will require a licence from the central bank. These activities include digital payments and stored value.
In essence, the rule highlights that DeFi projects will now be brought into the UAE’s crypto regulatory scope, ending all excuses for an exemption from compliance.
While the draft doesn’t include tax provisions, it shows that more major economies are looking to ensure proper oversight of DeFi operations within their jurisdictions.
