The UK government is preparing a new tax framework that would treat many decentralized financial lending and liquidity operations on a “no win, no loss” basis, deferring capital gains tax until there is a genuine economic disposal.
In the result of a consultation published On 26 November 2025, HM Revenue & Customs said it was developing rules so that certain crypto-asset loans and liquidity pool arrangements would only be taxed when the tokens are actually surrendered, rather than each time they move in and out of a protocol.
Previous guidance had drawn criticism because users could face capital gains charges simply by depositing tokens into DeFi protocols and withdrawing them later, even if they got the same assets back. HMRC now says it is working on an approach that treats these “assignments” as no-win, no-loss, and confirms that this model could extend to automated market makers as well as more traditional lending setups.
According to the broad outlines outlined in the consultation documents, single-token deposits, crypto lending, and multi-token liquidity pools would all fall under the framework. The tax would be calculated when a user actually sells or economically disposes of the tokens, rather than on each technical transfer.
Aave CEO calls result a victory for DeFi borrowers
Aave founder and CEO Stani Kulechov highlighted the change after HMRC published the consultation summary. In an article on
He described the conclusion as a major victory for DeFi in the UK users who want to borrow stablecoins against their crypto collateral, arguing that borrowers are not trying to dispose of their assets when they lock up tokens for added liquidity. Kulechov also said that Aave Labs participated in the consultation to push for rules better suited to the economic reality of using the protocol.
The HMRC document confirms that it has engaged extensively with the industry and that respondents are strongly in favor of moving away from a pension-style model and towards a no-win, no-loss principle. Officials say they will continue to evaluate the case for legislative change and develop the new approach first for individuals, before considering expanding it to businesses.
CARF extension brings comprehensive user reporting to the UK from 2026
At the same time, the government is strengthening reporting rules for crypto platforms. A separate political document on the Cryptoasset Reporting Framework, published on November 26, requires UK reporting crypto-asset service providers to collect and report data on customers residing in the United Kingdom from January 1, 2026.
CARF, developed at the OECD level, already underpins cross-border exchanges of crypto transaction data between tax authorities. The UK’s new measure extends this system so that HMRC receives standardized and structured data on all UK taxpayers using domestic and overseas platforms, including full identity details and transaction history.
Secondary legislation passed in June 2025 brings domestic CARF rules into force in early 2026, with the first international data exchanges planned for 2027. HMRC says the aim is to combat tax avoidance and support compliance without changing the underlying tax obligations themselves.
If adopted, the combination of deferred capital gains on DeFi Loans and expanded CARF liquidity pools and reporting from 2026 would reshape how UK users interact with lending protocols and exchanges: the tax would move closer to economic assignments, while HMRC’s visibility into on-chain and platform activity would sharply increase.
