The HMRC Releases New Guidelines of Staking and Lending Cryptocurrency

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Ian Taylor, Crypto UK’s executive director, has stated that while the Her Majesty’s Revenue and Customs (HMRC) considers cryptocurrency as property for taxation purposes,  other regulatory bodies and the government are not.

Details of the regulations 

In addition, the HMRC has announced regulations that could interfere with progress in Decentralized Finance (DeFi). The new regulations focus on treating UK DeFi staking and lending as property.

They also consider if rewards and returns from such services should be revenue or capital for the sake of taxation. These rules are essential as tax professionals did not know how to handle DeFi with the current rules.

The HMRC explained that staking it lending tokens using DeFi is constantly changing. For this reason, it isn’t possible to know all situations where a liquidity provider or lender earns retains and the kind of returns they earn. For this reason, the regulator has released guiding principles.

As per the guidelines, returns through lending and staking DeFi assets will not be considered interest. The reason is that the U.K does not think of digital assets as currency. It instead considers them property.

Guidelines could burden the investors 

Critics believe that these guidelines could cause tax problems. The guidelines suggest beneficial ownership if the token was transferred to the platform. As a rainy, they would have to pay capital gains tax and be disposed of because of taxes.

Taylor points out that these rules create issues for crypto investors. Moreover, investors in the stock market do not undergo similar challenges. In addition, the rules force investors to report any transaction, which could cause confusion in tax compliance.

According to the HMRC, many factors could influence the returns. For this reason, investors should find out all details of the transaction to understand the nature of the returns.

Taylor adds that these guidelines do not align with the government’s goals to attract innovation and investment after Brexit.

Matt Hancock, a member of parliament and the previous Secretary of State for Health and social care, had asked the House of Commons to make progressive crypto-related policies that would make the country crypto-friendly.

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