UK Considers New DeFi Tax Regime

The UK government is seeking to make changes to the tax treatment of lending and borrowing on decentralized finance (DeFi) protocols. HM Revenue and Customs has launched a consultation that will run until June 22, 2023, asking for input from investors, professionals, and firms engaged in DeFi activities, as well as representative bodies and think tanks, on a proposed new DeFi tax regime.

Under the proposed changes, crypto used in DeFi transactions would not be treated as a disposal for tax purposes. This means that Capital Gains Tax (CGT), which is typically triggered when an asset is disposed of, would not apply. Instead, a taxable event would occur when cryptocurrencies are disposed of in a non-DeFi transaction.

The consultation states that a transaction must meet certain criteria to be considered a DeFi transaction. Specifically, it should involve the initial transfer of crypto assets from a lender to a borrower, or through a smart contract, with the borrower being obligated to return the tokens. Additionally, the lender should have the right to withdraw the same amount of tokens that were initially lent or staked.

The proposed changes could have a significant impact on the DeFi ecosystem in the UK. As it stands, many DeFi protocols require users to pay transaction fees, which can be subject to taxes. However, if the proposed changes are implemented, these fees could potentially be exempt from taxation, creating a more favorable environment for DeFi activities in the UK.

The consultation is part of the UK government’s wider efforts to regulate the cryptocurrency industry and ensure that it is operating in a safe and secure manner. With the increasing popularity of DeFi protocols, it is crucial that governments and regulators keep pace with these developments to ensure that they can effectively regulate this rapidly evolving sector.

Overall, the proposed changes to the tax treatment of DeFi transactions in the UK could have a significant impact on the industry. If implemented, they could make the country a more attractive destination for DeFi activities and provide a more favorable regulatory environment for individuals and entities engaged in these activities. It remains to be seen how the consultation process will unfold, but it is clear that the UK government is taking steps to ensure that it can effectively regulate the cryptocurrency industry and support the growth of this innovative sector.


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South Korea to Introduce 10%-50% Gift Tax on Crypto Airdrops

The Ministry of Strategy and Finance of South Korea announced on Monday that hard-forked tokens, staking rewards, and crypto airdrops will be subject to gift tax under the country’s Inheritance and Gift Tax Act.

The South Korean Ministry of Finance said that during its response to a tax law interpretation for the freely movable digital asset by exchanges.

The National Tax Service (NTS), the tax authority in Korea under the Ministry of Strategy and Finance, said that any free virtual asset transfers in the form of airdrops, staking rewards, and hard-forked tokens would attract a gift tax.

The authorities will levy the tax on third parties who get the crypto transfers free. According to the announcement, gift tax will be: “Levied on the third party to whom the virtual asset is transferred free of charge.”

While the virtual asset gains tax will be postponed to 2025, the authorities said free virtual asset transfers would attract a 10%-50% tax under the Inheritance and Gift Tax Act.

The South Korean gift taxation law applies to all items of economic value which can be converted to fiat currency.

Under the Act, once a recipient receives a gift, they will be expected to file a gift tax return within three months of receiving it.

Due to the lack of regulations surrounding the digital asset market, the ministry said that actual taxation on such digital asset transfers would be considered a case-to-case basis.

Preparing Crypto Regulations

South Korea’s government postponed the virtual asset gains tax until 2025 because the country still does not have proper regulatory guidelines surrounding digital assets.

Last month, the government postponed plans to impose a 20% tax on all crypto earnings until 2025. Government officials said the decision was triggered by stagnant market conditions and the time required to prepare investor protection measures.

Initially, the country’s legislators delayed such plans until December 2023. Some reasons for the postponement were attributed to the current global market outlook, which is generally negative. The lawmakers were also concerned about the time required to prepare for investor protection measures.

Authorities prefer to postpone the tax until the crypto market matures and a new regulatory framework is thoroughly prepared to ensure transparency and investor protection.

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Indonesia Rakes in Approximately $6.8m Monthly from Fintech & Crypto Transaction Taxes

Since the rollout of fintech and crypto transaction taxes in May, Indonesia has amassed nearly $6.8 million, according to the nation’s tax compliance special staffer Yon Arsal.

During a recent retail conference, Arsal expressed his optimism that the figure would surge because the taxation was at the initial stages. 

The Indonesian finance ministry imposed a value-added tax (VAT) of 0.1% on crypto-assets purchases on May 1 this year. 

The Indonesian administration decided to tax crypto transactions based on surging popularity among local investors. 

Furthermore, crypto interest on Indonesian soil has skyrocketed since the onset of the COVID-19 pandemic. The number of crypto owners stood at 11 million in 2021. 

Per the report:

“According to the Indonesia’s Commodity Futures Trading Regulatory Agency, the total electronic asset transactions reached 59.8 billion USD in 2021, up 10 times from 2020.”

As the biggest economy in Southeast Asia, Indonesia took the crypto tax route to shore up state revenues in the post-pandemic era. 

Hestu Yoga Saksama, the tax office spokesperson, had previously noted

“Crypto-assets will be subject to VAT because they are a commodity as defined by the trade ministry. They are not a currency. So, we will impose income tax and VAT.”

Meanwhile, Fasset Technologies, a digital asset and fintech startup, recently partnered with payments giant Mastercard to drive financial inclusion in Indonesia.

With the world changing at an unprecedented rate, Fasset intended to offer its custom technologies to digitize banking services for Indonesians, Blockchain.News reported. 

On the other hand, Bank Indonesia is evaluating the influence of central bank digital currency (CBDC) on the local economy to facilitate financial system efficiencies and inclusion. 

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High Taxation in Japan is Driving Crypto Businesses Away, Entrepreneur Says

To prevent entrepreneurs from leaving the nation, Japan should minimize corporate taxes on crypto businesses, according to Sota Watanabe, the CEO of Web3 infrastructure company Stake Technologies Pte.

The high-profile crypto businessman pointed out:

“At least 20 or more firms have opted to establish their crypto business abroad rather than Japan because of the high levy.”

After moving his company to Singapore in 2020, Watanabe noted he hoped that the Japanese government would revamp the corporate levy starting next year. He acknowledged that he would return the company to his home country if this happened.


Watanabe added:

“It may take a few more years before Japan lowers income taxes for cryptocurrency gains made by individual investors.”

Crypto lobbying groups have been pushing the Japanese government to tone down corporate tax rules because they have been denting the digital asset sector. 


Therefore, Watanabe joins a growing list of entities asking the Japanese administration to rethink the corporate tax system because it stunts crypto growth in the nation.


Meanwhile, Japanese lawmakers recently revealed plans to amend the Act on Punishment of Organized Crimes and Control of Proceeds of Crime (1999) so that courts and law enforcement agencies would be granted the authority to seize cryptocurrencies linked to criminal activities. 


Nevertheless, it was indicated that the Ministry of Justice was to hold intensive discussions with the Legislative council to unlock various stalemates like how the private keys to a particular cryptocurrency would be obtained when enforcing the seizure. 

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Albania to Begin Levying Crypto Tax Next Year, Report says

Southern European country Albania is reportedly on track to begin taxing digital currency earnings as of 2023. (47).jpg

According to the local news platform Exit News, the taxation move is predicated on a new draft law on income tax by the country’s parliaments. This draft law has provided a lot of clarity to some of the grey areas in the digital currency ecosystem in the country, including the definition of what a “virtual asset” is, as well as “cryptocurrency mining”.

On virtual currency, the new draft laws noted them to be “a digital representation of a value that can be deposited, traded or transferred in digital form, and that can be used for payment or investment purposes or as a medium of exchange, including but not limited to cryptocurrencies,” with the definition excluding Central Bank Digital Currencies (CBDCs).

Per the new laws, individuals and enterprises will be taxed accordingly to reflect their relative investment and income in the digital currency ecosystem. While individual miners are billed to be charged a capital gain tax of 15%, more organized and corporate Bitcoin mining farms will be required to pay a business tax which is often customized to fit the business profile. 

While there have been a lot of raised eyebrows with Albania’s approach to monetary policies in general, the country did not have a very high ranking with MONEYVAL, the European Union Committee of Experts on the Evaluation of Anti-Money Laundering Measures, and the Financing of Terrorism. The regulator noted that Albania has not significantly put measures to combat money laundering, a weakness that may be exploited should the country become a safe haven for crypto-related money laundering.

Taxation has remained a very vital subject in the emerging cryptocurrency industry. Besides Albania, countries like India, Norway, and the United States of America are notably taking this very seriously. Should the Albanian Financial Supervisory Authority (AFSA) be in tune with the parliament in signing this crypto bill, it will come into effect by 2023.

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Rio de Janeiro to Accept Crypto Property Tax Payment from 2023

Rio de Janeiro is gearing up to be the first city on Brazilian soil to accept tax payment in cryptocurrencies from 2023, according to Bloomberg Linea. 

As a result, plans are underway for the municipality to hire companies that will aid in the conversion of crypto assets to the Brazilian Real, the nation’s currency.

As the second-largest city in Brazil, Rio de Janeiro intends to enter the non-fungible token (NFT) market, which continues to take the world by storm. Per the announcement:

“Among the suggestions already mentioned in the report is the creation of NFTs by the City Hall with images of tourist spots and spaces for artists to make interventions that would later become NFT.”

Therefore, the arts to be developed will be held in a blockchain wallet authorized by the municipality so that it gets a percentage of the sale.

Pedro Paulo, Rio de Janeiro’s Secretary of Finance and Planning, welcomed the intention of accepting crypto tax payment for properties and noted:

“In the future, this could be extended to services like taxi rides. Going further, we will utilize these crypto assets to stimulate arts, culture, and tourism through NFTs.”

This revelation comes months after Mayor Eduardo Paes revealed that the city was planning to become “Crypto Rio” by storing part of its treasury in cryptocurrencies, Blockchain.News reported. 

This objective was prompted by Rio de Janeiro’s goal of borrowing a leaf from Miami in its Bitcoin adoption journey so that it would become the tech capital of South America. 

The payment of taxes through cryptocurrencies has become a hot topic in different parts of the globe. 

For instance, Florida Governor Ron DeSantis recently disclosed plans to roll out a cryptocurrency payment option for businesses remitting taxes.

His sentiments were a response to the call that the state was one of the emerging hubs for cryptocurrency investment, given that leading crypto companies like have set foot in Miami.

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Court victory precedent: IRS may not tax staking rewards until sold

A Nashville couple’s lawsuit over taxes they paid on unclaimed and unsold Tezos staking rewards is coming to an end with the Internal Revenue Service (IRS) agreeing to issue them a refund.

The decision may set a precedent for future guidance on how crypto rewards earned through staking are taxed. At present Proof-of-Stake staking rewards are classified as income, with tax payable as they are gained. The new development suggests they should be only taxed when they are sold for USD.

The Jarretts filed a complaint against the United States government in May 2021 which stated that the 8,876 Tezos (XTZ) tokens they created in 2019 were not income and should not have been taxed as such. The complaint also claimed that the government was attempting to do something “unprecedented, which is tax creative activity rather than income.”

“Taxing newly created cakes, books, or tokens as income would have far-reaching and detrimental effects on taxpayers and the U.S. economy, and is without support in the Internal Revenue Code, regulations, caselaw, or the Constitution.”

According to court filings expected to be made public on Thursday the IRS declared it would follow through with the Jarretts’ request to refund with ”statutory interest as provided by the law” the $3,793 that the Jarretts paid for their unclaimed rewards last year.

As of yet, guidance on how to tax unclaimed staking rewards is lacking. The IRS asks taxpayers whether they have “received, sold, exchanged, or otherwise disposed of any financial interest in any virtual currency”, but none of those descriptors seem to pertain directly to the Jarretts’ unsold and unclaimed rewards.

Related: Crypto tax calculator CoinTracker valued at $1.3B following $100M raise

Forbes reported that sources close to the matter say the couple plans to pursue the case further in court to obtain longer-term protection and set a nationwide precedent. American taxpayers are likely praying that no legislative response to this court outcome resembles the U.K. regulator’s new guidance on crypto staking. There, staking crypto will often be considered as the sale of tokens and will incur capital gains tax.