PANews reported on August 19th that a Spanish DeFi investor was ordered by tax authorities to pay approximately $10.5 million in back taxes for using crypto assets as collateral for collateralized lending. The Spanish tax authorities classified the activity as capital gains, even though the investor did not sell the assets or realize a profit.

The report states that the investor had previously declared all cryptocurrency transactions and paid $5.84 million in taxes, but three years later, the tax authorities imposed tax on the use of assets as collateral to obtain loans through DeFi protocols. Tax consultants say this interpretation lacks economic and legal basis and contradicts the definition of capital gains in Spanish and EU law.

The Spanish tax authorities have sparked controversy by designating stablecoin loans and token transfers to DeFi protocols like Beefy or Tarot as taxable events. Article 33 of the Spanish Personal Income Tax Act stipulates that capital gains must reflect actual economic benefits and changes in net assets.