Lending protocols like @compoundfinance, @AaveAave, @CreamdotFinance needlessly punish users from the US and all of Europe. How? Whenever you deposit coins you receive a deposit token. Based on my research and experience, this tends to be classified as a sale of the collateral.

Deposit tokens are one of Defi‘s big innovations because they allow the deposit from one protocol to be used as collateral in a second protocol. But this is clearly a big problem, since users inadvertently sell coins they would have otherwise hodled to reach long-term tax status.

Classifying these deposits as sales makes no sense to me and better guidance might come in the future. But the lenders are in a position to improve the situation *today*: by asking the user whether they want to receive a deposit token or not.

One protocol that doesn’t force a deposit token on their users is @MakerDAO, so keep that in mind if this thread applies to you. For a longer read on the topic, see https://insights.deribit.com/market-research/on-tax-risk-in-defi/

PS: Mb needless to say, but whichever lender implements this first will probably have a big advantage with users from the US and Europe.

PSS: It applies to DEXs as well and every other protocol that has deposit tokens.