- The U.S. Senate has voted 70-27 to repeal an IRS rule expanding tax reporting requirements to decentralized finance (DeFi) platforms
- The rule, introduced during the Biden administration, aimed to classify DeFi platforms as brokers, obligating them to report user transactions to the IRS
- The repeal measure now moves to the House of Representatives and, if approved, will be presented to President Trump for final approval
In a decisive bipartisan action, the U.S. Senate voted 70-27 to overturn an Internal Revenue Service (IRS) regulation that sought to extend tax reporting obligations to decentralized finance (DeFi) platforms. This regulation, established during the final days of the Biden administration, intended to categorize DeFi platforms as brokers, thereby requiring them to report user transactions to the IRS. The repeal measure now advances to the House of Representatives; if it passes there, it will proceed to President Trump for final approval.
Broker Definition Stoked Crypto Advocate Fires
The contested IRS rule was finalized in December 2024, aiming to enhance tax compliance by broadening the definition of “broker” to include DeFi platforms. This classification would have mandated these platforms to report detailed information on user transactions, similar to the requirements imposed on traditional financial brokers and centralized cryptocurrency exchanges. The rule was scheduled to take effect in 2027.
The cryptocurrency industry and several lawmakers criticized the rule, arguing that it imposed undue compliance burdens on DeFi platforms, which facilitate peer-to-peer transactions without intermediaries. They contended that treating these platforms as brokers was inappropriate and could stifle innovation within the rapidly evolving DeFi sector.
Senator Ted Cruz (R., Texas), who led the repeal effort, described the rule as “devastating to the industry” and emphasized the need to protect financial innovation. The reversal was celebrated by crypto advocates, including new AI and crypto czar David Sacks:
The White House is pleased to announce its support for the CRA introduced by @SenTedCruz and @RepMikeCarey to rescind the so-called Broker DeFi Rule, an 11th hour attack on the crypto community by the Biden administration. pic.twitter.com/T7Hxasb4aC
— David Sacks (@davidsacks47) March 4, 2025
Trump Will Vote on Repeal
With the Senate having utilized the Congressional Review Act, which allows Congress to overturn recent federal regulations with a simple majority vote and passed the repeal measure with substantial bipartisan support, the resolution now awaits consideration in the House of Representatives.
If the House approves the measure, it will be sent to President Trump, who has indicated support for the repeal. Notably, the White House issued a statement expressing strong backing for the resolution, citing concerns over stifling American innovation and raising privacy issues related to taxpayers’ personal information.
Critics Warn of a Rise in Crypto Crime
Repealing the IRS rule is projected to reduce federal revenue by approximately $3.9 billion over the next decade. Critics argue that eliminating the rule could hinder efforts to combat financial crimes, including tax evasion, by reducing the IRS’s visibility into DeFi transactions.
Mike Kaercher, deputy director of the Tax Law Center at New York University, expressed concerns that the repeal “would encourage more of the digital asset industry to move into the shadows, making it more difficult to counter crimes ranging from tax evasion to fentanyl trafficking to terrorist financing.”
The Senate’s decision reflects the growing influence of the cryptocurrency industry in shaping regulatory policies and underscores the ongoing debate over how to effectively regulate emerging financial technologies without hindering innovation.
