Her Majesty’s Revenue and Customs (HMRC), the U.K.’s tax agency, on Wednesday, has released a controversial set of guidance that could affect innovation in Decentralized Finance (DeFi).
The updated regulation focuses on the treatment of digital assets specifically for DeFi lending and staking in the UK, and whether returns or rewards from these services are deemed as capital or revenue for taxation purposes. Owing to the cutting edge nature of DeFi these services had fallen into a grey area with tax professionals unsure of how the existing rules apply.
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