DeFi tax basics (lending, LPs, yield)

Why DeFi is harder to tax

Decentralised finance — lending, liquidity pools, yield farming — generates frequent, automated, on-chain events with no statement and often no rand value attached. SARS has not published exhaustive DeFi-specific rules, so you apply first principles: is each event a disposal (CGT/revenue) or a receipt of income? Treatment is evolving, so document and hedge.

Lending

Supplying crypto to a lending protocol and earning interest-like rewards generally produces income at the rand value when rewards accrue. Whether depositing into the protocol is itself a disposal depends on the mechanics — if you receive a different token representing your deposit, that exchange may be a disposal.

Liquidity pools (LPs)

Adding to a liquidity pool often means swapping your tokens for LP tokens, which can be a disposal of the deposited assets. Rewards and fees earned are generally income. Removing liquidity is another potential disposal. The substance of the protocol — what you give and receive — drives the analysis.

Yield farming

Yield rewards are generally income at market value on receipt; the value received becomes the base cost for a later disposal. Frequent reward accruals make automated valuation essential.

Wrapping and bridging

Wrapping a token or bridging across chains may or may not be a disposal depending on whether beneficial ownership and the asset genuinely change. Treat conservatively and document.

The practical reality

DeFi can generate hundreds of taxable legs a year. The risk is not the rate — it is missing or mis-valued events. Reconcile on-chain activity and attach rand values to every leg.

Not tax advice

DeFi treatment is unsettled and fact-specific — confirm with a registered tax practitioner.