The tax treatment of stablecoins is set to change significantly from 6 April 2027, with eligible stablecoins expected to be treated more like conventional money rather than other cryptoassets.
Currently, buying, selling or spending stablecoins can create a Capital Gains Tax (CGT) disposal in much the same way as transactions involving Bitcoin and other cryptoassets.
Under the new rules, disposals of qualifying stablecoins by individuals will be exempt from CGT. For people who regularly use stablecoins to move between investments or make payments, this could remove a significant amount of tax administration.
Unlike cryptoassets whose values can fluctuate significantly, stablecoins are designed to maintain a relatively stable value against a traditional currency, such as the US dollar.
They have become an increasingly important part of the cryptoasset market. More than $300 billion of stablecoins are in circulation and around 1.2 million individuals engage in stablecoin transactions.
Their stability can make them useful for investors who want somewhere to temporarily hold funds while buying and selling more volatile cryptoassets. Stablecoins can also be used to pay for goods and services, including cross-border transactions where they may offer an alternative to traditional payment methods.
The government’s proposed tax treatment reflects this increasing use of stablecoins as a means of payment rather than simply an investment.
Under the existing rules, most disposals of cryptoassets can potentially be subject to CGT.
A disposal does not only occur when someone sells cryptoassets for pounds. It can also arise when one cryptoasset is exchanged for another, when cryptoassets are used to purchase goods or services or when they are given to another person other than a spouse or civil partner.
Simply moving cryptoassets between wallets you own is not generally considered a disposal.
This means someone actively using stablecoins can potentially create multiple transactions that need to be considered for CGT purposes, even where the stablecoin’s value has barely changed.
From 6 April 2027, individuals disposing of eligible stablecoins will be exempt from CGT.
Broadly, an eligible stablecoin will be a cryptoasset designed to maintain a stable value in relation to a fiat currency, with fiat currency or other assets held to support that value.
Removing CGT from qualifying transactions should make the tax treatment considerably simpler, particularly for people using stablecoins as a payment method or as a temporary home for funds between cryptoasset investments.
There is an important distinction when it comes to returns generated from stablecoins.
Although many stablecoins do not pay interest, any interest-like return received from holding an eligible stablecoin will be treated as savings income and potentially subject to Income Tax.
Depending on an individual’s circumstances, their Personal Savings Allowance may be available against this income.
The proposed change recognises that not every cryptoasset is used in the same way.
Treating qualifying stablecoins more like money for tax purposes could remove an unnecessary layer of complexity for people who use them for transactions rather than speculative investment.
However, it does not mean cryptoassets generally will become exempt from Capital Gains Tax. Selling or exchanging other cryptoassets and using them to purchase goods or services can still result in a taxable disposal.
For anyone with significant or frequent cryptoasset activity, good transaction records therefore remain important. As the tax rules develop alongside the cryptoasset market, being able to distinguish between different assets, transactions and returns will be essential when calculating tax liabilities.
The government’s policy paper explaining the proposed taxation of stablecoins can be found here.
All data and figures referred to in our news section are correct at the date of publishing and should not be relied upon as still current.
