The British regulator imposed stricter rules for DeFi
Her Majesty's Revenue and Customs (HMRC) has updated its guidelines for managing digital assets, especially with respect to staking and lending. Experts believe this will make life much harder for crypto investors.
Why is it so important?
- Stricter rules will render some available cryptocurrency transactions not profitable anymore.
According to CryptoUK, the rules were updated on Wednesday, February 2. New HMRC guidelines add new reporting requirements for investors who work in DeFi. Specifically, they will be required to provide additional information to the tax authorities on any loaned assets placed on credit, stacking, or liquidity pool. Experts note that investors would be forced to report hundreds and thousands of transactions in this case, making their work much more complicated.
“HMRC treats crypto assets as property for tax purposes. However, this is inconsistent with the approach currently being adopted by Government and other regulatory bodies in the UK, including the Treasury and the FCA, who regard crypto assets as financial instruments and regulate them as in line with other financial services and products,” said Ian Taylor, Executive Director of CryptoUK.
What is DeFi
Decentralized finance (DeFi) is replacing traditional banking and the financial sector, offering an alternative to fiat money in the form of cryptocurrencies. Basically, the DeFi sector provides the same banking services, but more efficiently: smart contracts reduce the risk of fraud, low fees help generate higher profits, and affordability makes the services available to all Internet users, bypassing legal restrictions. However, we should note that all services are paid only in digital coins, which you still need to withdraw in the real world. More information about Defi is here.