According to the Executive Summary, HMRC plans to review the taxation of DeFi crypto activities, such as lending and liquidity‑pool participation, to reflect their economic impact better. With this framework, simply moving tokens into a DeFi loan or liquidity pool would not trigger a tax event. Tax can be applied only when the user sells, exchanges, or otherwise realises an economic gain or loss, following a “no gain, no loss” (NGNL) approach.
This new review aims to clarify how the crypto‑asset lending and liquidity‑pool transactions are taxed in the U.K. Under the proposed framework, transfers into loans or liquidity pools would not count as disposals for Capital Gains Tax, even if the legal owners have changed. Tax is only to be applied when assets are actually sold, exchanged, or otherwise leave the holder’s control, ensuring that taxation reflects real economic transactions rather than just on‑chain transfers.
As HMRC stated in the review,
“The government is seeking views on modifying the tax treatment of decentralised finance (DeFi) lending and staking transactions … with the intention of creating a regime that better aligns the taxation of cryptoassets used in DeFi lending and staking with the underlying economic substance.”
In our recent report, the UK already urged to tax crypto to redirect capital to local stocks as HMRC engages with industry to refine legislation, with stakeholders stressing that tax should reflect actual economic activity rather than triggering a ‘disposal’ on lending or staking tokens.
A recent report indicates that roughly 77% of the total value locked in DeFi lending protocols in 2025 resides on Ethereum. Ethereum supports most DeFi activities, particularly staking and lending on platforms such as Lido, Aave, and Uniswap.
As of the time of press, Ethereum (ETH) trades at $3,031.82, up 0.77% over the past day and 12.1% over the past week. This price gain appears to reflect market attention to ETH, driven by the UK’s progress on its DeFi tax review.
