Stablecoins to escape CGT
Stablecoins are currently taxed in the same way as other cryptoassets. However, this is set to change from April 2027, when eligible stablecoins are expected to be treated similarly to money for tax purposes.
Why stablecoins?
Stablecoins are currently dominated by US dollar-based products, with stablecoins worth over $300 billion in circulation. They are extremely convenient for investors who wish to park their funds while buying and selling other more volatile cryptoassets.
Stablecoins are a good way to pay for goods and services, avoiding most of the costs associated with traditional payment methods such as credit cards. This is especially the case with cross-border transactions. Around 1.2 million individuals engage in stablecoin transactions, and the changes will make the tax framework easier to understand.
Eligible stablecoins
An eligible stablecoin will broadly be defined as a cryptoasset that maintains a stable value in relation to a fiat currency. Fiat currency or other assets will need to be held for the purposes of supporting the stable value.
Cryptoasset disposals
Most disposals of cryptoassets are subject to capital gains tax (CGT). There is a disposal if an individual:
- sells a cryptoasset;
- exchanges one type of cryptoasset for a different type of cryptoasset;
- uses cryptoassets to pay for goods or services; or
- makes a gift of cryptoassets to another person (unless it is to their spouse or registered civil partner).
However, there is no disposal if, for example, an individual simply moves cryptoassets between different wallets.
Tax status changes
From 6 April 2027, the disposal of eligible stablecoins by an individual will be exempt from CGT. Although most stablecoins are non-interest bearing, should any interest-like returns be received from holding eligible stablecoins, this will be treated as savings income subject to income tax. The personal savings allowance of £1,000 or £500 will potentially be available.
The government’s policy paper on the taxation of stablecoins can be found here.
