As the crypto economy continues to expand exponentially, authorities throughout the world, including the government of the United Kingdom, are examining strategies to regulate and tax the use of digital assets.
On July 5, the UK government’s taxes department – Her Majesty’s Revenue and Customs (HMRC) – published a call for evidence-seeking views on the taxation of crypto-asset loans and ‘staking’ within the context of Decentralised Finance (DeFi).
According to the call:
“In particular, the government is interested in determining whether administrative hurdles and expenses might be lowered for taxpayers engaged in this activity and if the tax treatment can be better linked with the underlying economics of the transactions involved,” the request said.
To determine its future regulatory stance, the HMRC requested input from investors, professionals, and firms engaged in DeFi activities, including technology and financial service firms, trade associations and representative bodies, academic institutions and think tanks, and legal, accountancy, and tax advisory firms.
The request for evidence will remain available until August 31, 2022, as indicated.
UK government interest in cryptography
In April, the UK government unveiled a package of measures “intended to ensure the UK financial services industry continues at the forefront of technology, attracting investment and employment and expanding consumer choice.”
As reported by Finbold, the package included proposals to recognise stablecoins as a viable form of payment, prompting several crypto CEOs to express the conviction that market regulation was undergoing a sea change.
The HMRC noted in its latest request for evidence that the measures included “an intention to explore and, where appropriate, resolve concerns highlighted by stakeholders concerning the tax treatment of DeFi loans and stakes” and that “this call for evidence attempts to inform that review.”
The Director-General for financial services at the Ministry of Finance announced in early June that the UK was planning to construct a “sandbox” for testing distributed ledger technology (DLT) initiatives within its financial market infrastructure in 2023, five months after a House of Commons member predicted that the UK could become the home of FinTech and cryptocurrency.
Central bank’s stance
However, the governor of the Bank of England, Andrew Bailey, is suspicious, emphasising in a mid-June statement to the UK Parliament Committee that cryptocurrencies have no inherent value, citing the market decline as his primary rationale.
At the same time, the BoE’s deputy governor Jon Cunliffe was more bullish, telling attendees at the Point Zero Forum that the crypto market’s survivors may become the technological businesses of the future, similar to Amazon (NASDAQ: AMZN) and eBay (NASDAQ: EBAY).
