UK Treasury Seeks Input on Tax Treatment for DeFi Protocols

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The tax treatment of lending and borrowing on decentralized finance (DeFi) protocols may soon change in the United Kingdom, as the Treasury’s taxation arm seeks input on a potential new regime. The proposed legislation would require the initial transfer of crypto assets from a lender to a borrower, or via a smart contract, with the borrower required to return the tokens. The consultation is the second stage in a five-step process, including legislation development, implementation and monitoring, and finally reviewing and evaluating the change. In July 2022, the British government initiated the process by asking for feedback on the taxation of crypto asset loans and staking in the context of DeFi. The primary goal was to simplify the administrative procedure and lower costs for taxpayers who participated in DeFi, while simultaneously investigating tax treatment.

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According to Herald Business, South Korea’s Central Bank is one step closer to being granted authority to investigate digital asset platforms. Because of the monetary character of cryptocurrencies, the Financial Services Commission has been reserved to allow the Bank of Korea (BOK) to become more involved in overseeing digital asset providers. However, the FSC has reversed its position and acknowledged the BOK’s ability to require documentation. The National Assembly will now evaluate the Financial Service Commission’s approval to grant the BOK investigative powers, as well as continue to debate the framework for Bitcoin service providers.

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