UK Government is Seeking Public Commentary on DeFi Taxation
The government of the UK is seeking public input from professionals, investors, and companies on the taxation of decentralized finance (DeFi) activities.
The purpose of this is to ascertain whether administrative burdens and costs could be reduced for taxpayers and whether tax treatment can be better aligned with the underlying economics of the transactions involved.
As part of the wider plans to make Britain a global hub for crypto-asset technology and investment, Her Majesty Revenue and Customs (HMRC) will be gathering evidence on the taxation of crypto-asset staking and loans.
Input has been requested from a broad demographic, including financial service companies, representative bodies, trade associations, think tanks, educational institutions, legal, tax advisory, and accounting businesses.
Interested parties have time until 31st August this year to submit their response with the help of an email provided by HMRC. Once a sufficient amount of evidence has been gathered, the government will publish a summary of responses together with details of its next steps.
A Global Crypto-asset Hub
In recent months, the UK has been gearing up to become a global hub for the crypto industry with a string of innovative new measures announced.
In particular, HM Treasury, the government economic and financial ministry, revealed a package of measures in April which is set to make the UK a hub for digital payment companies, starting with the regulation of stablecoins.
The move to regulate stablecoins is intended to pave the way for them to be recognized as a form of payment for retail customers in the UK. The government has stated that it will achieve this by taking the necessary steps to bring stablecoins into its regulatory framework and amending existing money and payments legislation.
The Treasury has also confirmed that it will consult on plans later this year to regulate a much wider range of cryptocurrencies in the future. Moreover, it is yet to specify which stablecoins will be regulated.
The Bank of England has welcomed the Treasury’s proposals for bringing stablecoins into the country’s regulatory framework following the release of its striking 40-page report on financial stability relating to crypto-assets.
Apart from that, the government revealed a Crypto asset engagement group that will aim to work more closely with the industry to explore how the country’s tax system can further encourage the adoption of cryptocurrency, which includes the establishment of a financial market infrastructure ‘sandbox’ to enable firms to experiment and innovate.
Another standout element of the package of measures is that the government will seek to proactively explore the benefits of distributed ledger technology (DLT) in the UK’s financial markets, going as far as to initiate a research programme focused on the use of DLT for sovereign debt instruments.
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