U.K government seeks investors’ guidance for DeFi tax rules, BoE calls for tougher regulation

  • British authorities seek to reduce the complexities involved with the taxation framework involved for DeFi staking and lending.
  • The Bank of England (BoE) has urged strong regulatory measures before any major risks appear to the financial system.

Regulators across the globe have been struggling to come up with crypto taxation and regulatory rules. The U.K. government has decided to consult investors in order to form the taxation framework for decentralized finance (DeFi).

By undertaking this exercise, the authorities want to test whether it can reduce administrative burden and costs for the taxpayers. It also wants to test whether they can align the tax treatment to the underlying economics of transactions involved.

The U.K. government said that it will be running its call for evidence for a period of eight weeks starting July 5, 2022, to August 31, 2022. The official announcement reads:

The government is seeking views on the taxation of cryptoasset loans and ‘staking’ within the context of Decentralised Finance (noted:

This underscores the need for enhanced regulatory and law enforcement frameworks to address developments in these markets.

The Bank of England is already working to bring stablecoins into a “special administration regime”. This would give the central bank the ability to regulate stablecoins linked to a wider financial system. The British regulators have been closely following the recent market events right from the Terra crash to the insolvency of Three Arrows Capital.