Response on draft legislation for cryptoasset loans and liquidity pools

Bitcoin Policy UK responded to HMRC's technical consultation on draft legislation for the tax treatment of cryptoasset loans and liquidity pools, published in July 2026 as part of the Finance Bill 2026-27 package. The draft inserts a new Part 4A into the Taxation of Chargeable Gains Act 1992 and introduces “no gain, no loss” capital gains tax treatment for qualifying lending, borrowing and liquidity pool arrangements, an approach the response supports. Under the current rules, lending Bitcoin can be treated as a disposal and trigger a capital gains tax charge. Under the draft, a UK Bitcoin holder who lends 1 BTC and receives 1 BTC back would pay no tax at either point, with tax due only when the Bitcoin is sold or spent.

The response asks HMRC to clarify that price movements alone should not mean a loan fails the “low risk of loss” test, and that the test should look at the arrangement as a whole, including collateral, liquidation terms and counterparty risk. It warns that a borrower whose Bitcoin collateral is forfeited after a default could face a tax charge despite being worse off, and asks for plain English guidance with worked Bitcoin examples before the rules take effect on 6 April 2027. It also asks HMRC to distinguish native Bitcoin from wrapped Bitcoin such as wBTC in its guidance, to provide transitional relief for positions open on that date, and to confirm when it will address capital gains tax on everyday Bitcoin payments.