Borrower

The tax position of the person borrowing tokens is more straightforward and is the same regardless of whether or not beneficial ownership of the tokens is acquired from another party.
The table below gives a brief overview of the tax position for the borrower of cryptoassets, but should be read in conjunction with the detailed guidance and examples.
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At Point of Entry
Principal loan received
Acquisition of tokens borrowed, for sterling market value at date of receipt
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At Point of Exit
Principal loan repaid with return (reward)
CGT disposal of tokens repaid and return paid to lender, based on sterling market value at date of repayment

The receipt of the loan could be in fiat (ie GBP/USD/EUR) or cryptoasset tokens.
For tax purposes the deemed acquisition costs of the cryptoasset tokens received as a loan is the sterling market value (at the date of receipt) of the tokens borrowed.
This loan could be put to many different uses. Where it is used to purchase other cryptoassets, there is a disposal of the tokens borrowed for capital gains tax purposes, applying the usual matching rules. Generally, where the tokens borrowed have appreciated in value since the loan was received, there will be a capital gain.

When the loan is repaid, this is treated as a disposal of the cryptoassets borrowed for CGT purposes. The disposal proceeds of are the sterling market value (at the date of repayment) of the tokens repaid.
The acquisition cost is the sterling market value upon receipt of the loan.
Therefore, subject to the matching rules, there is a capital gain where there has been an increase in value throughout the term of the loan. Equally, there is a capital loss where the value has decreased.

There is no tax relief for any lending fees paid to the lender (whether paid to the lender upon repayment of the loan or during the term of the loan).
However, if cryptoassets are used to pay the lending charges, this is a CGT disposal of those cryptoassets. The disposal proceeds are the sterling market value of the tokens at the date they were used to pay the lending fee. The matched acquisition cost of the tokens is deducted, to arrive at a capital gain or loss.

See our Example 2A showing the tax position for the borrower of a collateralised loan.
HMRC's Example 6 shows the CGT computation for a borrower repaying a loan.
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Overview
At point of entry
Receipt of loan
At point of exit
Repayment of loan
Reward paid to lender
Examples