The United Kingdom is moving toward one of its most significant crypto regulatory shifts in years. HMRC has introduced a proposal that could dramatically simplify life for people using decentralized finance — known as DeFi — including those who don’t actively participate in the crypto sector.

DeFi refers to services that operate without banks or intermediaries. Users can deposit their cryptoassets into specialized applications where they can be lent out, earn rewards, or be combined with other assets. While the technical side is complex, the practical idea is simple: the user parks their crypto, and the system works with it. This is exactly where the current British tax system runs into problems.

Tax applied only upon real disposal not on simple transfers

Under current rules, a Brit who deposits tokens into a lending platform or a liquidity pool may trigger an immediate capital gains tax — even when no actual gain exists and the user has merely shifted tokens from one service to another.

HMRC now proposes that such actions no longer count as taxable events. Instead, they would fall under a “no gain, no loss” regime. Tax would only be assessed when the user truly disposes of the tokens, at the point where an actual profit or loss emerges.

For everyday crypto users, this would mean less stress, less paperwork, and a significant reduction in tracking technical micro-transactions that currently confuse even experienced users.

Nothing is final yet. HMRC continues gathering feedback

Although enthusiasm is high, the reform is not yet confirmed. HMRC continues consulting experts, companies, and regular users to ensure the new framework covers all relevant transaction types while staying simple enough for non-experts to follow.

So far, 32 formal responses have been submitted, including from Binance, venture fund a16z, and industry association CryptoUK. All highlight that the current system is confusing and often unfairly penalizes active users.

What this means for the UK

If approved, the proposal could inspire other countries also struggling to define fair taxation for DeFi and digital assets. It would also signal that London intends to remain a relevant global hub for crypto business by offering clear and fair rules.

For users, it’s mainly good news: if HMRC moves forward, many unnecessary barriers within DeFi will disappear, making the entire system more transparent.

Sources:

https://www.gov.uk/government/consultations/the-taxation-of-decentralised-finance-involving-the-lending-and-staking-of-cryptoassets/outcome/the-taxation-of-decentralised-finance-defi-involving-the-lending-and-staking-of-cryptoassets-summary-of-responses

https://x.com/MariaRiivari/status/1994180213488460111