Today Aave Labs filed two responses to HMRC on the draft Finance Bill 2026-27 legislation, covering UK's taxation of stablecoins and of cryptoasset loans and liquidity pools.
These are good drafts. They fix a mismatch between tax treatment and economic substance that industry has raised since 2022, and several recommendations from our May submission are in the published text: a capital gains exemption for qualifying stablecoins with no de minimis threshold, scope not confined to sterling, and lending returns treated as interest.
Our responses make four asks.
Tax should follow economic substance. Depositing into a lending protocol and receiving a token evidencing that deposit does not change your position — you hold a redeemable claim to the same asset. But a threshold condition asks whether there is a significant risk you cannot get your assets back. At high borrowing demand, a large withdrawal may wait until loans are repaid or new deposits arrive. That is a queue, not a loss. We have asked HMRC to confirm it.
The rules should reach institutions. As drafted, the reliefs apply to individuals only. A company supplying the same asset to the same market still has a taxable disposal going in and coming out. Corporate rules are coming, which is welcome — we have asked for a published timetable.
Eligibility should not depend on what a holder cannot check. A stablecoin qualifies if it was "designed to be used" for payment or settlement. That asks what an issuer intended, which no secondary-market buyer can establish. We have proposed a test you can verify from the mechanics: is the asset designed and operated to hold its value at par?
A tax bill should not arrive on the first day of a relief. Anyone holding an eligible stablecoin the day before the rules start is treated as selling and rebuying it, owing tax on the sterling exchange movement — with no sale, no proceeds and no minimum threshold. HMRC's own impact assessment counts about 700,000 people affected. We have asked for the charge to be removed.
A rule that treats supplying an asset as a disposal does not just tax the transaction; it forces you to sell the asset you were trying to keep in order to pay the bill. These drafts remove that deterrent for individuals, which matters for the UK's competitiveness.
We think the drafts get the architecture right. We hope our comments help get the detail right too.