UK Begins Tax Crackdown on Resident Cryptocurrency Transactions

The UK plans to require domestic cryptocurrency exchanges to report transactions by local residents starting next year to address gaps in reporting regulations.

The change gives tax authority HMRC (HMRC) access to domestic and cross-border cryptocurrency transaction data for the first time.

CARF is scheduled to be launched in 2027

This change expands the scope of the Cryptocurrency Reporting Framework (CARF), a cross-border reporting framework developed by the Organization for Economic Co-operation and Development (OECD).

The framework allows information to be shared between tax authorities around the world and requires cryptocurrency asset service providers to perform annual due diligence, verify user identities and report detailed transaction information.

CARF’s first global information exchange is scheduled to take place in 2027.

UK aims to prevent cryptocurrency from escaping common reporting standard

Given that CARF is a cross-border framework, cryptocurrency transactions that occur directly within the UK are excluded from automatic reporting channels under the policy. paper It was shared by HMRC earlier this week.

Explanation of HMRC’s new measures (Source: UK Government)

The purpose of expanding CARF’s reach to domestic users is to prevent cryptocurrencies from becoming an “outside the CRS” asset class, outside the visibility that applies to traditional financial accounts under the Common Reporting Standard.

UK officials also said that expanding CARF’s scope to domestic activities would give tax authorities access to a more complete data set to identify non-compliance and better assess taxpayer obligations.

UK proposes “no gain, no loss” tax rules for DeFi

The reporting changes and expansion of CARF scope in the UK come shortly after HMRC signaled support for a “no gain, no loss” (NGNL) approach to cryptocurrency lending and liquidity pool placements earlier this week.

Currently, when a decentralized finance (DeFi) user deposits funds into a protocol, even if they cash out those funds or take out a loan, that action is considered a disposition and may be subject to capital gains tax. NGNL arrangements can defer capital gains taxes until a true economic disposition is made.

HMRC has published the results of its consultation in the UK regarding the taxation of DeFi activities related to lending and staking.

A particularly interesting conclusion is that when users deposit assets into Aave, the deposit itself is not considered a disposition for capital gains.

— Stani.eth (@StaniKulechov) November 27, 2025

In practical terms, the NGNL proposal could mean that users who deposit cryptocurrencies into a lending protocol or donate assets to an automated market maker will no longer be taxed at the time of their deposit. Instead, the tax only applies if you sell or trade the asset in a way that ultimately realizes a gain or loss.

This proposal seeks to align tax regulations with how DeFi actually works. It will also help reduce administrative burdens and tax consequences that do not reflect the economic reality of some activities taking place in the DeFi space.

The NGNL approach also applies to multi-token arrays, which are often used in complex distributed protocols. For example, if a user gets back more tokens than they deposited, the gains will be taxed. However, if the user receives fewer tokens than they deposited, the transaction will be treated as a loss.

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