HMRC’s ‘updated’ DeFi staking, lending regulations are here, but where’s the clarity

ambcrypto.com:

Last year, the U.K became theleading country in Europe for cryptocurrency transactions, with $170 billion worth of deals. According to a report from blockchain data platform Chainalysis, central, northern, and western Europe (CNWE) had the biggest cryptocurrency economy in the world.

CNWE transaction volume grew significantly across virtually all cryptocurrencies and service types. Especially on decentralized finance (DeFi) protocols.

That being said, regulators time-to-time have kept a check on the surge. Accordingly, they have now released a set of regulations to offset the hike.

U.K’s tax agency, Her Majesty’s Revenue and Customs (HMRC), published an ‘updated’ version of regulations on Wednesday. It focused mostly on the treatment of digital assets, specifically for DeFi lending and staking in the U.K. However, it might hamper innovation in Decentralized Finance (DeFi).

The returns or rewards from these services were deemed as capital or revenue for taxation purposes.

“The lending/staking of tokens through decentralized finance (DeFi) is a constantly evolving area, so it is not possible to set out all the circumstances in which a lender/liquidity provider earns a return from their activities and the nature of that return. Instead, some guiding principles are set out,” the HMRCreport stated.

CryptoUK, a trade body representing the crypto-sector in the U.K shared this update on Twitter.

— CryptoUK