© ShutterstockPrimary ImageThe UK government has announced that it is seeking views from companies, professionals from academic institutions, tax advisory firms, and investors on the taxation of activities related to decentralized finance (DeFi).
Decentralized finance has become an integral part of the crypto finance space. Out of the numerous DeFi products being offered, staking and lending allows people to lock some of their holdings into liquidity pools to earn rewards in the form of periodical yields.
Statistically, the number of stakers globally has spiked significantly. As of July 5, the total number of global stakers stands at around 5.1 million. Global staked value was around $85.97 billion and the market capitalization of proof-of-stake (PoS) coins was approximately $130.02 billion, per data from Staking Rewards. Popular coins involved in staking comprise Ethereum 2.0 (ETH), Solana (SOL), Cardano (ADA) Polkadot (DOT), Binance Coin (BNB), Avalanche (AVAX), TRON (TRX), Cosmos (ATOM), NEAR, and Internet Computer (ICP).
Therefore it comes as no surprise that the United Kingdom is taking appropriate measures to tackle the growth of DeFi. An official post read, "The government is interested in ascertaining whether administrative burdens and costs could be reduced for taxpayers engaging in this activity and whether the tax treatment can be better aligned with the underlying economics of the transactions involved."
According to the Economic Secretary, John Glen, one of the benefits of this initiative is that it transforms the taxation system to make it work more easily for decentralized finance assets.
Those who wish to participate in this exercise have until the last day of August to contribute to the discussion. This is part of the government's initiative that was earlier outlined in April to make the country one of the powerhouses in the emerging crypto sector. This was followed by a consultation paper in May that aimed to address the risks surrounding stablecoins in light of Terra's collapse.
As of July 5, the total value locked (TVL) in DeFi is $74.88 billion, per data from DeFiLlama.