UK Treasury requests feedback on taxation of DeFi staking and lending activities: Finance Redefined

Welcome to Finance Redefined, your weekly source of crucial decentralized finance (DeFi) insights — a newsletter designed to deliver the most important updates from the previous week.

The taxation division of His Majesty’s Treasury in the United Kingdom has suggested new regulatory modifications aimed at streamlining the taxation of DeFi returns and alleviating the “administrative burden” on taxpayers.

A DeFi options protocol has secured $17 million to establish a buy-side marketplace and broaden the range of listed tokens. Circle, the issuer of USD Coin (USDC), has introduced a cross-chain USDC transfer protocol connecting Ethereum and Avalanche.

Ordinals Finance, a DeFi protocol based on Ethereum, is reportedly involved in a rug pull, defrauding its users of over a million dollars and has removed its presence from all social media platforms following the emergence of this news.

The leading 100 DeFi tokens by market capitalization experienced another week of mixed price movements, with only slight fluctuations over the past week.

UK Treasury seeks input on taxing DeFi staking and lending

The taxation division of the UK Treasury is requesting feedback on a potential new framework for taxing DeFi. A consultation initiated on April 27 by His Majesty’s Revenue and Customs will continue until June 22. It invites “investors, professionals, and firms involved in DeFi activities,” along with representative organizations and think tanks, to share their perspectives on the government’s proposed tax treatment for DeFi.

According to the suggested legislative changes, cryptocurrency utilized in DeFi transactions would not be classified as a disposal for tax purposes, which typically triggers a capital gains tax event.

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DeFi options protocol raises $17M for buy-side marketplace

Thetanuts Finance, a DeFi protocol providing crypto options contracts, has raised $17 million to create a buy-side marketplace and expand its list of cryptocurrencies, as stated in an announcement made on April 24 by the team.

The team intends to utilize the newly acquired funds to establish a “buy-side altcoin options market” aimed at attracting options buyers. The announcement indicates that, until now, DeFi options protocols have primarily focused on drawing in sellers seeking consistent income rather than options traders looking for leverage. With the newly raised capital, the developers aspire to be among the first protocols to offer products for the buy side of the options market.

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Circle launches cross-chain USDC transfer protocol for Ethereum, Avalanche

Circle, the creator of USDC, has unveiled a mainnet protocol that enables users to transfer USDC between Ethereum and Avalanche, according to an announcement made on April 26. Previously, users of Avalanche holding USDC on Ethereum were required to deposit their tokens with a Circle partner or utilize a third-party bridge to move USDC across networks. The new cross-chain transfer protocol appears to eliminate the necessity for USDC bridges.

The team released a video on April 13 demonstrating the functionality of the new protocol. Unlike a conventional bridge, it does not lock tokens sent to its contract. Instead, it destroys them and issues new tokens on the receiving network. Users can directly redeem these new tokens for bank deposits by depositing them with Circle or its partners.

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Ordinals Finance has conducted a $1M rug pull: CertiK

Ordinals Finance, an Ethereum-based DeFi protocol that facilitates lending and borrowing of inscriptions, has been accused of executing an exit scam referred to as a “rug pull.”

In a press release dated April 24, which was reviewed by Cointelegraph, blockchain security firm CertiK reported that the protocol’s developer withdrew 256 million of its native OFI tokens from its smart contracts using a “safuToken” function. An additional 13 million OFI were extracted through an “ownerRewithdraw” function, resulting in a total withdrawal of 269 million tokens, as stated by CertiK.

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DeFi market overview

The total market value of DeFi experienced a slight increase this past week. Data from Cointelegraph Markets Pro and TradingView indicates that the top 100 DeFi tokens by market capitalization had a mixed week, with the majority of tokens trading in the negative. The total value locked in DeFi protocols was just above $50 billion.

Thank you for reading our summary of this week’s most significant DeFi developments. Join us next Friday for more stories, insights, and education regarding this rapidly evolving space.