The UK government has introduced a new proposal to improve tax regulations for the decentralized finance (DeFi) sector by recommending the adoption of a “no profit, no loss” principle. This initiative aims to align tax laws with the practical operations of DeFi and reduce outcomes that do not accurately reflect reality. The proposal was developed with input from major industry players to ensure the rules are fairer and more workable. DeFi is an innovative financial system that uses blockchain technology to facilitate transactions without traditional financial institutions, allowing users to access services like lending, investing, and trading without intermediaries. However, current tax laws often fail to accommodate the complex and rapid nature of DeFi transactions, imposing unnecessary financial burdens on users. The new UK proposal seeks to tax only actual and certain profits or losses from such financial activities, excluding unrealized gains or losses, thereby providing users relief from financial uncertainty and enabling better financial decision-making. Additionally, this step could encourage investment in the DeFi sector and strengthen its legal framework. With the global rise of DeFi, many countries are working to establish appropriate regulations to protect users and investors while enhancing transparency in the financial system. The UK’s move is seen as a significant development that could serve as a model for other nations. Although the proposal is not yet finalized, its implementation is expected to enhance legal clarity and financial stability in the DeFi space worldwide, offering users improved services and fostering greater transparency and trust in the financial system.
Source: coindesk
