- Trump repeals IRS rule classifying DeFi platforms as brokers, easing tax reporting burdens for the crypto sector.
- Congress overturns Biden-era IRS DeFi rule with bipartisan support, marking a major crypto regulatory shift.
- New law blocks IRS from imposing broker rules on DeFi, protecting innovation and aligning policy with blockchain tech.
President Donald Trump signed a bill into law that overturns an Internal Revenue Service (IRS) regulation that was issued in the final days of the Biden administration. The now repealed rule had tried to make DeFi platforms similar to brokerage platforms that would require them to collect and report user tax data in same manner as traditional financial institutions. This is the first congressional action on a cryptocurrency related issue to be repealed in America.
Critics of the original IRS rule faced immediate criticism from lawmakers and industry participants who claimed that decentralized blockchain platforms lacked the infrastructure and knowledge of its users to fulfil broker-related tax reporting obligations. Traditional financial regulations do not always apply to DeFi protocols as they run autonomously through smart contracts and usually do not have any centralized control.
Congressional Support and Legislative Process
Senator Ted Cruz introduced a resolution to repeal the IRS’s DeFi broker rule and it had strong bipartisan support. The measure was passed by the Senate by a vote of 70–28 and cleared the House of Representatives with a large majority. The repeal was pushed by Congressional proponents who said the regulation would place an undue burden on DeFi platforms and hamper technology innovation in the United States.
Representative Mike Carey (R-Ohio), who played a central role in the repeal effort, stated that the IRS’s attempt to treat DeFi entities as brokers would have overwhelmed the agency during tax season and risked disrupting an emerging sector. However, he stressed that the new law allows the IRS to focus on its core responsibilities and does not restrict the DeFi ecosystem growth.
Industry Reaction and Regulatory Implications
The law’s enactment brought industry organizations and policy leaders on board, who considered it a significant milestone in the digital asset regulatory realm. The executive directors of DeFi Education Fund and White House Crypto Council said lawmakers’ repeal of the funding bill matches regulation with the technological nature of decentralized systems.
Removal of the rule is expected to ease DeFi developers and users’ concerns about legal risks and costs associated with compliance. It also prohibits the IRS from introducing similar regulations into place within the confines of the Congressional Review Act, which grants the authority to Congress to oversee the regulations.
Next Steps in U.S. Crypto Legislation
However, repeal of the DeFi broker rule shifts the focus to other pending legislative items in Congress relating to digital assets. Currently, lawmakers are trying to pass bills that will create the regulatory environment for stablecoin issuers and set clear market rules for crypto transactions. Proposals have moved out of the House and Senate relevant committees and efforts are underway to reconcile the differences between the two in a single compromise bill.
Furthermore, President Trump has expressed his interest in signing additional digital asset legislation on his desk before August. The lawmakers are weighing the proposed timeline after considering the IRS rule repeal to be a possible precursor to broader crypto regulation.
Currently, the crypto industry is observing developments that could influence the regulatory framework of digital assets in the U.S., as legislative activity continues. The repeal could even impact future debate of how certain financial oversight could be applied to technologies that operate outside the realm of traditional finance.
