The UK eases crypto taxation! DeFi lending and liquidity pools are “exempt from immediate capital gains tax,” with Aave’s founder going wild with praise

DeFi players’ tax nightmare is finally over! According to a report by Decrypt, the UK government has announced a major loosening of tax rules for decentralized finance (DeFi). Starting in April 2027, depositing cryptocurrency into DeFi lending protocols or liquidity pools will no longer be treated as a “taxable disposal,” meaning users will no longer have to pay capital gains tax on unrealized “paper gains.” The friendly policy, expected to benefit 700k people, was also strongly praised by Aave founder Stani Kulechov.
（Background: The UK forms an “RWA tokenization working group”! 54 major institutions including BNY Mellon and JPMorgan join the lineup, targeting an $88 trillion blue-ocean market）
（Additional context: The UK FCA warns about a “AI arms race” in finance—ramping up regulation for models like ChatGPT, Claude, Gemini, and other LLMs）

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• End “paper gains,” new rules benefiting 700k people
• Reduce burdensome administrative overhead, praised by Aave founder
• Stablecoin tax treatment may be eased, giving the market a one-year buffer

As the decentralized finance (DeFi) ecosystem continues to mature, regulators in various countries have begun to adjust tax rules that are too rigid. On July 14, 2026 (Taipei time), according to media outlet Decrypt, the UK HM Revenue and Customs (HMRC) released its latest crypto tax amendment policy, bringing long-awaited major good news to a wide range of DeFi participants.

Ending “paper gains,” new rules to benefit 700k

According to HMRC’s policy document released on Monday, the UK government will amend the “Taxation of Chargeable Gains Act 1992.” Starting April 6, 2027, when users deposit crypto assets into DeFi lending agreements or provide them to liquidity pools via automated market makers (AMMs), they will officially be subject to the “No Gain, No Loss” (NGNL) principle—no longer recognized as a “taxable disposal” that triggers Capital Gains Tax.

This means that as long as the asset used for entering and exiting the agreement is “the same kind of asset,” no tax event will be triggered. Tax liability will be deferred until the investor truly sells the asset and realizes it into “cash,” or when there is a difference between the number of tokens withdrawn from the liquidity pool and the number deposited—at which point gains or losses must be calculated in accordance with the law. In addition, assets used as collateral for lending are likewise excluded from Capital Gains Tax. It is estimated that this new regime will benefit around 700k individuals and trustees in the UK who use crypto for lending and liquidity pools.

Easing cumbersome administrative burdens, Aave founder lauds

Looking back to 2022, HMRC’s guidance principles treated “depositing into DeFi agreements” strictly as an asset disposal. This forced users to file taxes and pay on the cumbersome “paper gains,” even though they had not sold any crypto in exchange for fiat currency—sparking strong backlash across the industry.

For the UK government’s decision to do the right thing this time, Aave founder Stani Kulechov publicly praised it. He said it was a big step in the “right direction,” and without this reform, taxpayers would face an unbearable burden of paperwork. Kulechov also noted that this is the sweet fruit the industry has picked after multiple rounds of consultation and lobbying since 2022, proving that DeFi’s tax rules are gradually becoming more mature and pragmatic.

HMRC in the UK is adopting new tax legislation related to crypto lending and liquidity pools.

Main take is that deposits into lending protocols will be treated as ‘no gain, no loss’ (NGNL), which effectively defers capital gains tax until an economic disposal. Also underlying…

— Stani (@StaniKulechov) July 13, 2026

Stablecoin tax may be loosened, giving the market a one-year buffer

In addition to relaxing Capital Gains Tax on lending and liquidity pools, Kulechov also revealed that HMRC is working on other plans. In the future, stablecoin tax treatment may be adjusted to be closer to traditional “currency,” further reducing friction costs when making payments and conducting transactions.

However, the policy still needs certification from the UK’s Office for Budget Responsibility (OBR) for final cost estimates. With more than a year of buffer before it officially takes effect in 2027, this will give DeFi users and major protocols ample time to adjust their tax filing strategies. The rollout of this UK crypto-friendly policy is expected to significantly reduce tax complexity and encourage more traditional capital to participate in the DeFi ecosystem without pain.