HMRC tells DeFi deposits to chill until 2027 — capital gains can wait for the real exit 🫡

HM Revenue & Customs will defer capital gains tax on certain cryptocurrency lending and liquidity-pool transactions under a "no gain, no loss" treatment that takes effect on April 6, 2027, the UK tax authority said Monday. The measure is intended to align the country's capital gains framework with the economics of decentralized finance, ensuring that gains and losses are generally recognized only when a participant makes an economic disposal of the underlying cryptoassets. HMRC framed the change as a fairness measure, stating that it "will support fairness in the tax system" by preventing tax events from being triggered when users have not realized an economic gain or loss.

The policy applies to three specific cases: lending a single cryptoasset, borrowing one, and supplying tokens to an automated market maker, the smart-contract engine behind liquidity pools. Entering or exiting those arrangements in the same asset will no longer trigger a capital gains event, and collateral posted to borrow against will be disregarded for capital gains tax. HMRC estimates the measure will affect around 700,000 individuals and trustees, amending the Taxation of Chargeable Gains Act 1992. The shift follows a 2022 call for evidence, a 2023 consultation and a summary of responses at Budget 2025, and caps a multi-year process that had previously left users facing capital gains tax on paper before they had sold anything.

Aave founder and CEO Stani Kulechov welcomed the approach in a Monday X post, writing that "this is the right direction, mainly driven by the industry feedback demonstrating that any other approach would cause significant admin burden for the tax payer." Kulechov also cast the outcome as evidence that industry feedback can shape policy, likening it to what he described as industry influence on a £20,000 cap on individual stablecoin holdings, and said the growing body of DeFi tax rules showed the sector maturing while flagging separate HMRC plans to tax stablecoins more like money. The measure's final costing still requires certification by the Office for Budget Responsibility, and under UK law for 2025-2026 taxpayers pay between 18% and 24% on capital gains from crypto transactions depending on whether they qualify as basic-rate or higher-rate.

The HMRC announcement came the same week Reform leader Nigel Farage prepared to defend the parliamentary seat of Clacton in an Aug. 13 by-election triggered by his resignation, with the politician reportedly having received a $6.7 million donation from crypto billionaire Christopher Harborne, described by Farage as a "reward" for the UK's exit from the European Union and later as a "gift," alongside financial assistance from George Cottrell, a convicted fraudster linked to a crypto casino. The Clacton ballot will also feature Stephen Newnham, leader of the Solana community group Superteam UK, running as an independent; comedian and author Jon Harvey in costume as Count Binface, a self-described "independent space warrior" wearing a helmet in the shape of a trash bin.