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  • Tax treatment of lending to Crypto Liquidity Pools

    Is there any information yet about how HMRC intend to tax rewards from lending cryptoassets to DeFi liquidity pools? Will it simply be treated as income - the same as the current treatment of rewards from staking cryptoassets ? When cryptoassets are withdrawn from liquidity pools it is extremely unlikely that the number of each asset returned will be the same as the number originally lent. Will this difference be treated as a sale or purchase of the asset, and give rise to a CGT liability ? What records need to be kept ? The rapid increase in these types of instruments and the volume of transactions within them mean that guidance is needed very quickly if individuals are to correctly record their activities to enable them to complete their 2021 self assessment forms.