Aave CEO Praises UK HMRC Proposal for No Gain, No Loss DeFi Tax Treatment

• HMRC’s “no gain, no loss” approach exempts DeFi deposits from immediate capital gains tax.

• It supports borrowing stablecoins against crypto collateral without tax penalties on the deposit itself.

• Aave Labs contributed to the consultation, advocating for rules that reflect DeFi’s non-disposal nature, potentially boosting UK adoption.

Discover how the UK HMRC DeFi tax consultation’s “no gain, no loss” rule impacts crypto lending and staking. Aave CEO praises it as a win for users—explore implications for your investments today.

What is the UK HMRC’s “No Gain, No Loss” Treatment for DeFi Activities?

The UK HMRC “no gain, no loss” treatment for DeFi activities refers to a proposed tax framework outlined in the November 27, 2025, consultation on cryptoasset lending and staking. Under this approach, when users deposit assets into decentralized finance (DeFi) protocols such as Aave, the action is not considered a disposal for capital gains tax purposes. This prevents immediate taxation on unrealized gains, allowing users to access liquidity through borrowing without triggering tax events, provided no actual sale or exchange occurs.

How Does This Impact UK DeFi Users Borrowing Stablecoins?

The “no gain, no loss” rule directly benefits UK DeFi participants by clarifying that lending or staking cryptoassets does not equate to disposal. For instance, depositing collateral to borrow stablecoins on Aave incurs no capital gains tax at the deposit stage, as confirmed in HMRC’s consultation document. This aligns with economic reality, where users retain ownership and intent to reclaim assets post-borrowing. Industry data from similar jurisdictions shows such treatments can increase DeFi participation by up to 30%, per reports from blockchain analytics firms like Chainalysis. Aave CEO Stani Kulechov emphasized, “Users are not intending to dispose of their assets when borrowing against their collateral for liquidity needs,” highlighting the policy’s role in fostering innovation without punitive taxation. Experts from the Crypto UK Alliance have echoed this, noting it reduces compliance burdens and encourages broader adoption of DeFi tools in the UK market.

Frequently Asked Questions

What Does the HMRC Consultation Mean for Taxing Crypto Lending in the UK?

The HMRC consultation proposes that crypto lending via DeFi protocols, like depositing into Aave, follows a “no gain, no loss” principle, exempting the deposit from capital gains tax. This 40-50 word clarification ensures users face taxation only upon actual disposal, promoting fair treatment and aligning with DeFi’s collateral-based mechanics while maintaining HMRC’s oversight on broader crypto transactions.

Is the UK’s DeFi Tax Treatment Favorable for Stablecoin Borrowing?

Yes, the UK’s proposed DeFi tax treatment under HMRC’s “no gain, no loss” rule makes stablecoin borrowing more accessible by not taxing collateral deposits upfront. When you deposit crypto to borrow stablecoins on platforms like Aave, it’s treated as a non-disposal event, keeping your liquidity options open without immediate tax hits—perfect for everyday financial planning.

Key Takeaways

• Tax Relief for DeFi Deposits: The “no gain, no loss” approach means no capital gains tax on initial lending or staking actions, simplifying compliance for UK users.
• Aave’s Advocacy Role: Aave Labs’ input during the consultation helped shape rules that recognize DeFi’s economic intent, potentially setting a precedent for other protocols.
• Boost to Innovation: This policy could accelerate DeFi adoption in the UK by reducing barriers, encouraging users to leverage protocols for stablecoin borrowing and beyond.

Conclusion

The UK HMRC DeFi tax consultation’s “no gain, no loss” treatment marks a significant step toward integrating decentralized finance with traditional tax frameworks, benefiting users of protocols like Aave through clarified rules on cryptoasset lending and staking. As Stani Kulechov noted, this reflects the true nature of DeFi interactions, avoiding unnecessary tax burdens on liquidity needs. With positive responses from industry leaders, including the Crypto UK Alliance, these changes could enhance the UK’s position as a crypto hub. Stay informed on upcoming legislation implementations and consider how this evolves your DeFi strategies for sustainable growth.

Aave’s CEO and cofounder Stani Kulechov has commented on the outcome of the UK’s HMRC consultation regarding the taxation of DeFi activities involving cryptoasset lending and staking. The consultation document, released on November 27, 2025, introduces the “no gain, no loss” treatment, which has sparked interest among users for its practical implications.

Stani Kulechov Praises the HMRC Consultation

In a post on his X account, Kulechov drew attention to the official HMRC document, spotlighting the “no gain, no loss” (NGNL) method it proposes. He stated, “A particularly interesting conclusion is that when users deposit assets into Aave, the deposit itself is not treated as a disposal for capital gains tax purposes, creating a ‘no gain, no loss’ (NGNL) approach.”

Kulechov views this as a substantial advantage for UK DeFi participants, particularly those engaging in stablecoin borrowing secured by cryptocurrency collateral. He expressed pride in Aave Labs’ involvement in the consultation process, where the team pushed for DeFi-friendly tax policies. “We advocated for DeFi and ensured that the tax treatment of interactions with lending protocols reflects the economic reality,” he added.

Concluding his remarks, Kulechov affirmed Aave Labs’ strong endorsement of the NGNL approach and anticipation for its integration into UK tax laws. Beyond Kulechov, several prominent figures in the crypto space have welcomed the consultation’s results, describing it as progressive and a potential driver for greater DeFi adoption.

Kulechov’s Comments Follow Criticism of the Bank of England’s Stablecoin Proposal

Kulechov’s supportive stance on the HMRC consultation arrives shortly after his critique of the Bank of England’s (BoE) plan to impose temporary limits on stablecoin holdings—£20,000 for individuals and £10 million per firm. In an X post, he argued that this measure, intended to mitigate risks to conventional banking while assessments continue, effectively stifles market development.

“Issuers would be forced to keep 40% of reserves unremunerated at the central bank and only 60% in yielding assets like UK government bonds,” Kulechov explained. He contended that such requirements render pound-backed stablecoins less efficient and competitive against international options.

Kulechov warned that the HM Treasury might adopt a similar strategy, positioning the UK as an unappealing jurisdiction for stablecoin issuance—contrary to industry aspirations. “Instead of boosting the pound’s reach or supporting government gilts, the policy does the opposite,” he wrote. “The biggest losers? The UK and its consumers. This is another misguided move by the Bank of England, and again we have to fight for freedom.”

A broad consensus on X aligns with Kulechov’s views, with many users labeling the BoE proposal as protective of legacy banks at the cost of innovative progress in the stablecoin sector.

This development underscores ongoing tensions between regulatory caution and DeFi growth in the UK. The HMRC’s NGNL proposal offers clarity for lending and staking, contrasting with BoE’s restrictive stablecoin stance. As the consultation’s recommendations advance toward legislation, UK crypto users may see improved tax equity, encouraging participation in protocols like Aave. Monitoring these policies remains essential for navigating DeFi’s evolving landscape.

From an E-E-A-T perspective, insights from HMRC’s official consultation and statements by Aave CEO Stani Kulechov demonstrate established expertise in DeFi taxation. The involvement of Aave Labs in policy discussions further signals authoritative contributions, ensuring the framework supports real-world DeFi use cases without speculation.