Crypto glossary
DeFi taxes
DeFi taxes cover how lending, liquidity provision, wrapping, bridging and yield farming are taxed, an area where official guidance remains limited.
DeFi transactions often involve several steps that tax rules were not designed for. Depositing tokens into a liquidity pool returns an LP token; lending on a money market returns a receipt token; wrapping ETH into WETH or bridging to another chain swaps one token for a representation of it. The key question in each case is whether the user has disposed of one asset and acquired another, which would trigger a gain or loss, or simply moved the same asset.
Few tax authorities have answered these questions in detail. In the US, the IRS has issued little specific guidance, so many practitioners take positions based on general principles and keep records to support them. In Spain, the tax agency treats crypto-to-crypto exchanges as permutas, and some advisers apply that logic to LP tokens and wrapped assets, while others argue there is no change of economic ownership. Rewards from lending, farming or liquidity provision are generally treated as income.
Because positions vary, consistency and detailed records of every transaction, including gas fees, are essential.
Example
A user deposits ETH and USDC into a DEX pool, receives LP tokens and later withdraws more USDC and less ETH. Depending on the jurisdiction and position taken, the deposit, the withdrawal or both may be taxable.