How proceeds from lending or staking are taxed depends on the nature of the returns, which could be hard to determine, UK's tax agency says.
Be an informed investor - Don't be fooled by fraudsters misrepresenting themselves
Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Blockchain, Crypto, Digital Assets Regulations
OECD Report: Why DeFi Matters and Policy Implications
McCarthy Tetrault | Ana Badour, , | Feb 10, 2022
On January 19, 2022, the Organisation for Economic Co-operation and Development (the “OECD”), an intergovernmental organization founded to stimulate economic progress and world trade, published “Why Decentralised Finance (Defi) Matters and the Policy Implications” (the “Report”), a report on the growing application of decentralised finance (“DeFi”), and its increasing interconnectedness with traditional financial markets. The Report outlines some potential benefits of DeFi and describes why, in the OECD’s view, DeFi presents an “urgent challenge for policy makers”.
Evolution and Current State of DeFi
The Report defines DeFi as a development in the crypto-asset space seeking to replicate the traditional financial system in an “open, decentralised, permissionless and autonomous way” based on the use of blockchains, typically built on the Ethereum blockchain network. The key defining features of DeFi projects include:
- “non-custodial nature”, which implies the absence of a central authority accessing or controlling participants’ digital assets;
- “community-driven governance”, whereby markets rely on participants for decision-making; and
- “composability”, through which components of DeFi can be pieced together to create new products.
See:
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WEF: Decentralized Finance: (DeFi) Policy-Maker Toolkit
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Communication protocol systems: SEC’s big DeFi move
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A European approach to DeFi regulation
The Report observes that collateralised lending, which accounts for more than half of the value of crypto-assets locked in DeFi applications, is the fastest growing DeFi product. The Report finds that DeFi lending activities try to mirror market-based lending, such as securities lending and repurchase agreements, rather than traditional retail bank lending. While most DeFi market activity involves collateralised lending, the Report notes that uncollateralised lending is possible in DeFi through flash loans, through which borrowers make and repay a loan in the same single transaction.
A significant driver of lending activity in the DeFi space is yield farming, by which users lock their crypto-assets in a lending protocol (i.e. the system that enables lending and borrowing through smart contracts) to provide applications with liquidity in exchange for crypto rewards in the form of transaction fees. The Report identifies this as a key difference of DeFi as compared with traditional lending activity, as it allows the borrowing of assets leveraged by other DeFi users.
Other prominent DeFi applications identified by the Report include decentralised exchanges (DEX), derivatives and synthetics, asset management, insurance, payments and prediction markets.
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Download the 70 page PDF report --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Communication protocol systems: SEC’s big DeFi move
Protocol | Tomio Geron | Feb 28, 2022
Gary Gensler has been talking about taking on the crypto industry since he started last April. Now he’s getting down to business. The SEC is taking on the crypto industry in a way that could have far-reaching implications, particularly for DeFi, by expanding the agency’s regulatory authority over decentralized trading systems. The potential mechanism is a rule quietly proposed in January that would expand the definition of an “exchange” to include “communication protocol systems.”
“It’s the biggest, most profound rule-making the SEC has ever had,” said Nicholas Losurdo, a partner at law firm Goodwin who previously worked at the SEC. “It has the ability to sweep in a lot of DeFi and crypto, whereas now they don’t have jurisdiction.”
See:
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SEC Considering 50 Rule Changes: “One of the largest regulatory agendas in years”
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SEC Regulation: Constructing a Crypto Regulatory Framework – New Tech, Old Rules
The comment period on this proposal is still open, but some crypto industry officials are concerned enough that they’ve called on the SEC to extend its comment period to 90 days so that more industry participants can give comments.
This change in definition could mean regulating not just centralized crypto entities but even decentralized finance protocols, according to Losurdo.
[The 654-page proposal] makes key changes, such as changing the definition of an “exchange function” to bringing together people who interact, instead of just “orders” as it was before. This broadening of the scope of what an exchange is could pull in a range of crypto products, Losurdo said, since the SEC document says that it applies to “trading any type of security.” And Gensler has been clear that he believes that many digital assets are in fact securities.
The SEC is already trying to get more of the crypto world under its purview. So far it’s a mixed bag.
See: Top Crypto Lawyer says Don’t wait for the SEC
It has gone aggressively after crypto lending, recently settling with BlockFi for $100 million. But that involved a centralized lending operation. It’s not clear how the SEC would pursue truly decentralized lending, or more complex operations like staking.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Following Russia’s Invasion: Ukraine Suspends The Use of Electronic Money
CryptoPotato | | Feb 24, 2022
Ukrainian financial services providers will halt the issuance, replenishment, and distribution of electronic money, the country's central bank announced.
Putin’s “special military operation” caused major financial uncertainty in Ukraine. To bring more clarity to the situation, the National Bank of Ukraine informed that local monetary institutions will suspend the issuance and distribution of electronic money.
Ukraine’s Central Bank Introduces Its Policies
It is safe to say that Russia’s military operation in Ukraine is the top news today (February 24). As Russian troops are heading towards the biggest cities of their neighbor, many of the latter’s citizens started leaving their homeland.
See: Open-source intel’s offers valuable insight into global conflicts but misinformation remains a challenge
The National Bank of Ukraine ensured that branches will work in an “uninterrupted mode in the absence of threat to life and health of the population.” It also provided access to safe deposit boxes and non-cash payments. In addition, ATMs are supported by cash without restrictions, the institution informed.
As of today, though, local banks will suspend the issuance, replenishment, and distribution of electronic money. Such funds usually refer to fiat currencies in digital form, as it remains unclear whether this extends to cryptocurrencies.
The central bank also introduced a moratorium on cross-border foreign currency payments. The move is expected to enhance the employment of the Ukrainian hryvnia and thus protect it from a freefall in the days to follow.
See: U.S. CISA Agency warns of potential increase in Cyber threats
Subsequently, the institution halted the financial operations of those residents who took part in the armed aggression against Ukraine.
“Appropriate actions are necessary to ensure the reliable and stable functioning of the country’s financial system and maximize the activities of the Armed Forces of Ukraine, as well as the smooth operation of critical infrastructure,” the National Bank of Ukraine summarized.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Bitcoin wallet Nunchuk scolds Ontario court over order to freeze crypto assets
Financial Post | Stephanie Hughes | Feb 22, 2022
Bitcoin wallet Nunchuk.io is pushing back against an order from the Ontario Superior Court demanding the platform freeze and disclose information on digital assets sent to anti-vaccine mandate protesters.
In a letter made public on Twitter, the company stated that it was a self-custodial bitcoin wallet and software provider, not a custodial financial intermediary.
See: ‘Immediate emergency situation is over’: PM Trudeau revokes Emergencies Act
“We do not collect any user identification information beyond email addresses. We also do not hold any keys,” the letter read. “Therefore: We cannot ‘freeze’ our users’ assets; We cannot ‘prevent’ them from being moved; We do not have knowledge of ‘the existence, nature, value and location’ of our users’ assets. This is by design.”
“Please look up how self custody and private keys work,” the letter continued. “When the Canadian dollar becomes worthless, we will be here to serve you, too.”
See: Decentralization and Resilience are Key to Bitcoin’s Value
The Mareva Injunction, signed by Justice Judge Calum MacLeod, was also sent to eight other digital asset platforms, including Canada-based Bitbuy, as well as various fundraising platforms, financial institutions, and digital asset custodians.
In self-custodial wallets, digital asset owners hold their own private keys and thereby have exclusive access to their own assets, as opposed to having them in the custody of a financial third-party.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Canadian cryptocurrency exchanges ordered to cease dealings with convoy-linked accounts
City News Vancouver | Martin MacMahon | Feb 16, 2022
Cryptocurrency exchanges in Canada are being ordered by the RCMP to stop dealing with accounts suspected to have links to the anti-mandate convoy protest.
A letter from police orders digital coin exchanges not to deal with accounts with suspected links to that movement, which has caused disruptions across the country, most notably at several border crossings and in Ottawa.
The letter provides a list of accounts, according to an executive in that sector who has shared the details of that police instruction under condition of anonymity, which CityNews has granted.
This week, Prime Minister Justin Trudeau invoked the Emergencies Act for the first time in Canadian history.
In a statement, the Finance Ministry said the order “extends the scope of Canada’s anti-money laundering and anti-terrorist financing rules to cover crowdfunding platforms and the payment processors they use.”
“This change covers all forms of transactions, including digital assets such as cryptocurrencies.”
As police attempt to choke the convoy cash, chief executive Michael Vogel with Vancouver-based crypto platform Coinstream says it’s a reminder that using digital coins does not completely shield your identity or your dealings.
See: PM Trudeau Invokes Emergencies Act Catching Protester Firms including Crypto in Crossfire
At the time of his interview with CityNews, police had not contacted Vogel with that letter received by other companies in the cryptocurrency sector.
“Cryptocurrency exchanges in Canada fall under FINTRAC [the Financial Transactions and Reports Analysis Centre of Canada], so every customer does have to be onboarded with some form of verification, proof of address, the kind of standard documents that you’d have to have when opening a bank account,” Vogel told CityNews in an interview. “Crypto customers aren’t anonymous in Canada, and if there’s an issue that comes up, there is a mechanism for law enforcement to reach out to crypto companies.”
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CryptoAdventure | Andrew Throuvalas | Feb 17, 2022
Canadian Authorities Blacklist 34 Crypto Addresses Involved With Trucker Convoy
Canada’s government is expanding its crackdown on donations to protestors objecting to vaccine mandates in Ottawa. In new efforts, the Royal Canadian Mounted Police (RCMP) have ordered crypto exchanges to not facilitate transactions with blockchain addresses linked to the movement.
As reported by The Counter Signal on Wednesday, FINTRAC companies in Canada have been ordered to cease transactions with 34 specific crypto addresses. These include 1 Monero, Litecoin, and Cardano address, two Ethereum addresses, and 29 Bitcoin addresses.
See: An Analysis of Bitcoin’s Use in Illicit Finance
Each address can be viewed in the RCMP’s recent statement to crypto exchanges, as revealed by a Bitcoin news desk yesterday. The order is to address “illegal acts” falling under the “Emergencies Act” invoked by Prime Minister Justin Trudeau days ago. It gives the government power to freeze bank accounts suspected of involvement with the trucker convoy – without a court order.
The 9th address listed was the one used in the “Bitcoin For Truckers” campaign. The fundraiser collected over $900,000 in Bitcoin dedicated to the truckers and has since dispersed it to various addresses as part of its distribution process.
Bitcoin’s Real World Test
Bitcoin was specifically designed to bypass financial censorship from third-party intermediaries using peer-to-peer transactions. As such, even if exchanges blacklist a set of addresses, this does nothing to prevent users from sending Bitcoin to and from one another.
See: Right to anonymous payments
Things become a bit more complicated when attempting to convert Bitcoin into dollars – which usually requires a regulated exchange. In that case, the truckers may resort to peer-to-peer cash exchanges or Bitcoin ATMs to facilitate fiat conversion. They may also use mixing services like CoinJoin to erase their money trail on the blockchain and preserve their privacy.
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CTV News | Ian Bickis, Canadian Press | Feb 15, 2022
New rules going after blockade financing an overreach, critics say
Kim Manchester, managing director of financial intelligence training company ManchesterCF, says flagging accounts in this way could financially ruin those targeted and make it difficult for them to get any financial services in the future.
"It's very tough on people when the activities of the Canadian government can lead to the financial meltdown of individuals associated with the protests who are guilty by association, by directive, and not by judicial process."
He noted that the legislative framework around the laws was crafted to target terrorists and transnational organized crime, so when individuals are flagged under the system, banks and other financial institutions may be reluctant to deal with related accounts flagged as high risk.
See: Alex Vronces: Follow the money, but also look in the mirror
"Any financial institution who becomes aware of, or is informed to them by government, may be incredibly leery about dealing with that individual."
He said that invoking the Emergency Act is entirely out of proportion to the threats posed by the protesters and should be reserved for severe emergencies or when national security is compromised.
Vanessa Iafolla, a financial crime consultant, said the use of the measure was a "serious derivation from the normal democratic processes that we generally expect to see in Canadian society" and that the government could have gone about changing the rules without undertaking emergency powers.
She said that while accounts won't be shut down overnight, banks will have the option to eliminate from the market anyone involved in the protests.
"Clients will come under scrutiny and it is possible that many of them will be at risk of losing their access to all but the most basic banking services."
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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UK: Tax Regulator Updates Staking and DeFi Lending Guidance
Coindesk | Sandali Handagama | Feb 2, 2022
How proceeds from lending or staking are taxed depends on the nature of the returns, which could be hard to determine, UK's tax agency says.
Her Majesty’s Revenue and Customs (HMRC), the U.K.’s tax agency, has updated its guidance on the taxation of returns from decentralized finance (DeFi) lending and staking in proof-of-stake networks.
See: Foreign property tax implications associated with owning cryptocurrencies
According to the new guidance, published Wednesday, how a return from lending or staking is taxed depends on whether it is considered capital or revenue. But deciding if a return is capital or revenue is complicated, as the HMRC itself admits.
“The lending/staking of tokens through decentralized finance (DeFi) is a constantly evolving area, so it is not possible to set out all the circumstances in which a lender/liquidity provider earns a return from their activities and the nature of that return. Instead, some guiding principles are set out,” the update said.
The HMRC first published guidance on how returns from staking are taxed in March 2021. According to last year’s guidance, the taxation of staking activity depended on whether the activity amounted to a “taxable trade,” the wording almost identical to the rules laid out for taxing crypto mining.
In a statement published across multiple social media platforms, the digital assets trade association CryptoUK said the new guidance significantly alters the classification and treatment of DeFi lending and staking for tax purposes in the U.K.
See: Crypto-tax primer in Canada
According to the new guidance, the return may be treated as revenue or capital based on a number of factors:
- Whether the amount of the return was known at the time the agreement was made;
- whether the return is paid periodically or upon repayment of the principal; and whether the period of the lending is short term or long term;
- Another factor is how the return is realized: If it is realized through the disposal of a capital asset, it would indicate a capital receipt.
CryptoUK:
“This means that the transaction will be subject to Capital Gains Tax reporting at that moment (token leaves the user's wallet), even though control still lies with [users], and they expect that the asset is still theirs and will be returned at a point in the future,” the CryptoUK statement said.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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IIROC Investor Alert: Hashminer.io
IIROC | Feb 9, 2022
Be an informed investor - Don't be fooled by fraudsters misrepresenting themselves
February 9, 2022 (Toronto, Ontario) – The Investment Industry Regulatory Organization of Canada (IIROC) is warning Canadian investors not to be fooled by Hashminer.io.
Investors have recently contacted IIROC asking about companies that claim to require account insurance through regulatory bodies like IIROC, including companies doing business as Hashminer.io or possibly as SaveFunds-Trading.com.
IIROC-regulated investment firms and individuals must meet our high standards and deal fairly, honestly and in good faith with Canadian investors. We urge Canadian investors to exercise caution when dealing with non IIROC-regulated firms.
IIROC also does not play a role in providing insurance or approving withdrawals from investor accounts. Any company asking for payment or to increase the amount on deposit with them before approving a withdrawal is likely fraudulent.
See: IRS Special Agent “Seeing ‘Mountains Of Fraud in Cryptocurrencies, NFTs”
Certain crypto assets have generated a lot of hype. All investors must be informed and ask themselves important questions before purchasing higher-risk investment products that do not trade on stock exchanges.
Canadian investors should always confirm investment firms are registered with IIROC or with the CSA.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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