Government considers tax reforms to secure stablecoin's place in UK mainstream finance
Published on 15th June 2026
Current rules are triggering tax obligations that are increasingly hard to sustain for crypto users and businesses
At a glance
The UK government is consulting on whether stablecoins used like cash should be exempt from capital gains tax reporting.
A new OECD-backed reporting framework will dramatically increase HMRC's visibility over crypto tax compliance from 2027.
As the UK develops its digital assets regulatory regime, businesses may benefit from a clearer and less burdensome tax framework.
A UK government consultation on the taxation of stablecoins offers a clear indication of how stablecoins could be integrated into mainstream financial activity and what a reformed tax framework for them might look like.
Stablecoins are a type of cryptoasset, designed to minimise volatility by maintaining consistent value. They are typically pegged to another asset, such as a fiat currency, and backed by a reserve of underlying assets. Prominent examples include Tether (USDT) and USD Coin (USDC). By combining the advantages of blockchain technology with the price stability of traditional money, stablecoins have the potential to serve as a medium of exchange in everyday transactions and are expected to play an increasingly significant role in finance and payments.
UK tax legislation does not yet deal specifically with stablecoins or other cryptoassets. However, HMRC published its Cryptoassets Manual in March 2021 setting out how general principles of UK tax rules should apply to cryptoassets. Capital gains tax (CGT) can arise when investors dispose of cryptoassets, while income tax may apply to those derived through mining, "staking", or "airdrops" if done in the course of trade. Where received through employment, cryptoassets are broadly taxable in the same way as cash equivalents.
Regulatory backdrop
A new financial services regulatory regime covering cryptoassets, including stablecoins, introduced by the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026, is expected to come into effect in late 2027, with the Financial Conduct Authority (FCA) expected to finalise the relevant rules and guidance and open its application gateway (the process through which firms will apply for authorisation under the new regime) before the end of this year. The Bank of England has been consulting on rules for "systemic stablecoins", which will be subject to joint regulation by the Bank of England and the FCA.
CGT reforms?
The government is exploring options to reduce the administrative burden on individuals using stablecoins for CGT purposes. One approach would be to treat certain stablecoins as exempt assets, removing the need to account for disposals as chargeable events. Another would be to disapply reporting requirements for transactions below a specified threshold; for example, where a stablecoin is used to make a low-value purchase. This latter option, however, offers a more limited reduction in the computational burden than a full exemption.
Corporation tax
The government is considering whether more stablecoin transactions should be brought within the loan relationship rules, which broadly govern the taxation of corporate debt. This could be achieved by treating certain stablecoins as money, or as a form of debt, for tax purposes.
A related proposal would ensure that, where a company lends stablecoins, the transaction is taxed in the same way as a cash loan. The government is also exploring whether the creation of a cryptoasset token could be treated as the issuance of a debt instrument, bringing certain token issuances within the same regime.
Cryptoasset lending
Lending cryptoassets and participating in liquidity pools are common in decentralised finance and frequently involve stablecoins. The government has been separately considering how disposals within these arrangements should be taxed, and has proposed that certain disposals could be treated on a "no gain, no loss" basis, meaning that gains and losses would effectively be deferred by rolling them into the cost of a new asset.
Any changes to the stablecoin rules will need to work alongside this approach to ensure that gains and losses do not escape tax altogether. Two safeguards are under consideration: preventing the "no gain, no loss" treatment from applying where a disposal involves a move between exempt and non-exempt assets; and ensuring that deferred gains remain taxable on any future disposal.
Osborne Clarke comment
The call for evidence marks a significant step in the UK's approach to digital assets and stablecoins in particular. The government has recognised that the current position imposes a significant administrative burden on users. This direction of travel has won the backing of industry bodies, with the Institute of Chartered Accountants in England and Wales (ICAEW) expressing broad support for treating returns on stablecoins as interest rather than as capital gains. The ICAEW's position reinforces the case for a tax framework that reflects the economic substance of stablecoin transactions and their functional equivalence to traditional cash deposits. As stablecoins become embedded in mainstream financial activity, a regime under which using a stablecoin in a manner functionally identical to cash can trigger tax obligations will become increasingly difficult to sustain.
As the UK presses ahead with a domestic regulatory framework for stablecoins, crypto-users and industry participants would do well to consider how the proposed changes may affect their operations and product structures.
On compliance, HMRC remains focused on the level of potential underpaid tax in relation to cryptoassets. Thousands of "nudge letters" have been sent in recent years to UK taxpayers identified as cryptoasset investors, inviting them to disclose under-declared taxes, and a specific voluntary disclosure facility was established for cryptoassets in November 2023.
HMRC's visibility over cryptoasset compliance is set to increase dramatically with the UK's implementation of the Organisation for Economic Co-operation and Development's Crypto-Asset Reporting Framework (CARF). Under the framework, reporting cryptoasset service providers are required to collect and verify details on users and transactions and report them to HMRC annually. The first reports under CARF are due by 31 May 2027, covering both UK and non-UK resident investors. HMRC will then share information on non-UK resident investors with the relevant overseas tax authorities, and in turn will receive information on UK-resident investors operating on overseas crypto exchanges. If the reports reveal significant numbers of deliberately non-compliant UK resident investors, there is a risk that HMRC could decide to pursue the relevant crypto exchanges.
Elleze Francis, a Solicitor Apprentice with Osborne Clarke, contributed to this Insight.
