UK to Defer Capital Gains Tax on DeFi Lending, Liquidity Pool Deposits

In brief

HMRC has announced that depositing crypto into DeFi lending protocols and liquidity pools will be treated as “no gain, no loss,” deferring capital gains tax until an actual disposal.
The measure, published Monday and taking effect in April 2027, aims to end the disproportionate admin burden created by HMRC’s 2022 guidance.
Aave founder Stani Kulechov called it “the right direction,” crediting industry feedback for the shift.

The UK’s HM Revenue & Customs has confirmed that depositing cryptoassets into DeFi lending protocols and liquidity pools will no longer count as a taxable disposal, deferring any capital gains tax until an investor makes a genuine economic disposal of the assets.

The change, set out in a policy paper published Monday, takes effect from 6 April 2027 and will amend the Taxation of Chargeable Gains Act 1992. HMRC estimates it will affect around 700,000 individuals and trustees who use crypto loans and liquidity pools.

HMRC and DeFi

Under HMRC’s 2022 guidance, moving tokens into a DeFi arrangement could itself be a disposal, leaving users facing capital gains tax on paper before they had sold anything. Stakeholder feedback flagged that this produced disproportionate administrative burdens, and the new rules are meant to align the tax with the economics of the transactions.

The measure applies “no gain, no loss” treatment to three 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 no longer triggers a tax event; a gain or loss arises only on a real disposal, or, in a liquidity pool, if a user withdraws more or fewer tokens than they deposited. Collateral posted to borrow against will also be disregarded for capital gains tax.

Industry input

The shift caps a multi-year process, running from a 2022 call for evidence through a 2023 consultation to a summary of responses at Budget 2025, and it drew praise from DeFi’s leading builders. Stani Kulechov, founder of DeFi lending protocol Aave, called the approach “the right direction” in a tweet, arguing that any other treatment would have saddled taxpayers with heavy paperwork.

HMRC in the UK is adopting new tax legislation related to crypto lending and liquidity pools.
Main take is that deposits into lending protocols will be treated as ‘no gain, no loss’ (NGNL), which effectively defers capital gains tax until an economic disposal. Also underlying…
— Stani (@StaniKulechov) July 13, 2026

Kulechov 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. He also flagged separate HMRC plans to tax stablecoins more like money.

The measure’s final costing still needs certification by the Office for Budget Responsibility, and it will not take effect until April 2027, giving UK crypto users, and the protocols competing for them, more than a year to adjust.