UK has proposed a “No Gain, No Loss” (NGNL) rule for lending and staking in DeFi that defers Capital Gains Tax (CGT) until the moment of a true economic disposal. The measure aims to reduce the administrative burdens created by forced taxation of operational movements within protocols and intends to bring crypto taxation closer to the logic of traditional finance. It has been framed as an important victory for users.
HMRC proposes that operational movements of assets within DeFi protocols do not trigger a CGT event while economic ownership remains with the user. This covers actions such as depositing tokens into a lending platform, providing liquidity to an Automated Market Maker (AMM) or using assets as collateral. Capital Gains Tax (CGT) is the tax on the net gain realized when an asset is sold or disposed of; the proposal shifts taxation to the moment when the gain materializes.
The proposal by UK excludes from the treatment of “disposal” transfers necessary for a protocol to perform its function, while yields arising from DeFi continue to be taxed as income under existing rules. An AMM is, in one sentence, a contract that enables automatic token swaps and sets prices by algorithmic formulas; the proposal taxes the real variation in the quantity of tokens when leaving a pool, so if more units of a token are received than were originally deposited, that difference is considered a taxable gain.
The text clarifies that this is not a general tax exemption and that effective sales, economic cessions or realized gains from selling borrowed tokens remain subject to CGT. It also covers lending scenarios where the user sells the borrowed tokens and then repurchases them to repay the loan, at which point the gain or loss crystallizes.
Regulation, compliance and market effects
The proposal is in an active consultation phase by HMRC and is presented as an administrative relief intended to increase tax predictability. Industry organizations such as Recap and CryptoUK have backed the initiative, which seeks to harmonize rules with precedents from traditional finance — for example, repo-style rules on securities lending, where temporary transfers are not usually considered taxable disposals.
The measure pursues the reduction of compliance costs and the attraction of institutional interest that has so far avoided DeFi due to tax ambiguity. However, the proposal maintains taxation of income from rewards and does not eliminate tax risks in complex operations; leverage or structures that convert operational movements into economic disposals amplify both gains and losses and will remain subject to tax scrutiny.
At an international level, the debate is positioned alongside frameworks such as MiCA in the EU and explicit tax regimes in other countries, making regulatory clarity a competitiveness factor among jurisdictions. This context influences how different markets may respond to the rule and how participants assess cross-border tax consistency.
The “No Gain, No Loss” rule represents an attempt to adapt taxation to the workings of DeFi by refocusing CGT on real economic disposals and easing the burden on operational transfers.
