TLDR
- The US Senate, by a 70-27 vote, decided to dismantle a Biden-era mandate obligating DeFi protocols to submit reports to the IRS.
- The proposal now heads to the House, and if successful there, it will proceed to President Trump, who backs its elimination.
- Players in the crypto world have labeled the rule as 'impractical,' claiming it mandates decentralized exchanges to convey details of cryptocurrency sales.
- The Senate also assessed another proposal aimed at overturning a CFPB digital-payments regulation that impacts non-custodial crypto wallets.
- These actions are viewed as a step towards fostering crypto innovation within the US and deterring enterprises from relocating abroad.
The US Senate has made a decisive move towards putting an end to a disputed cryptocurrency reporting requirement. With a clear majority, senators passed a resolution to eliminate the Biden administration’s directive that would have required decentralized finance (DeFi) protocols to report to the IRS.
In a decisive 70-27 vote on March 4, Originally finalized during the concluding months of the Biden presidency, the rule sought to increase existing IRS reporting mandates to include decentralized exchanges, requesting brokers to declare gross proceeds from cryptocurrency trades, along with taxpayer involvement in such deals.
Following an analogous initiative in the House of Representatives, this Senate decision echoes earlier moves. On February 26, the House advanced a similar proposal to rescind the rule, though it's still pending a comprehensive vote.
To finalize the repeal, the resolution needs to clear the House hurdle. If it succeeds, it will move forward to President Donald Trump for endorsement. David Sacks, an AI and crypto advisor to Trump, confirmed the President's support for the repeal.
Industry professionals have been vocal in their critique of the IRS rule, describing it as impractical. Eli Cohen, a legal advisor at Centrifuge—a platform for tokenizing RWA—communicated to Cointelegraph that the rule 'was nonsensical and impractical in real-world applications.'
Cohen highlighted the fact that since the rule wasn't implemented, existing reporting obligations remain unchanged. 'It essentially means individuals must directly report to the IRS without any intermediary handling the obligation,' he elaborated. The Senate's efforts signify an initial assessment by what is perceived as the most supportive Congress for the crypto sector so far. Kristin Smith, the leader of The Blockchain Association, which advocates for crypto, praised this decision across her social platforms, hailing it as a significant triumph for DeFi and the US-based crypto industry. 1/ It's an excellent day for DeFi and the US crypto landscape. A cross-party assembly of senators, including 18 Democrats, successfully voted to dismantle the DeFi broker rule, which would have been detrimental to DeFi’s US operations.
for spearheading efforts to ensure this rule is eradicated permanently.
Smith underscored the strategic importance of this verdict. 'An effort to rescind this regulation is a segment of a larger plan to anchor crypto operations within the US,' she remarked.
More on the crypto regulation front, the Senate also reviewed another pivotal issue on March 4. Legislators voted to proceed with addressing a distinct resolution aiming to nullify a CFPB enactment that broadened control over fintech payment applications.
Thank you @SenTedCruz This second rule, finalized in early January, sought to impose obligations from the Electronic Funds Transfer Act onto non-custodial cryptocurrency wallets. Detractors argue that this poses substantial compliance issues for developers who govern neither the assets nor the custodial operations of these wallets.
— Kristin Smith (@KMSmithDC) March 4, 2025
The Senate is anticipated to make a final decision concerning the CFPB rule repeal shortly. Similar to the IRS rule overturn, this initiative will require endorsement from the House to be activated.
Senate Majority Leader John Thune (R-S.D.) characterized these moves as essential adjustments to counteract overregulation. 'The Biden regime exhausted all means to stifle financial innovation in the nation, endangering the potential to drive digital asset firms abroad,' Thune declared in a press statement.
Thune elaborated by stating, 'The Senate is continuously working to roll back these excessive regulations one at a time to restore financial liberty to Americans.'
Proponents of the CFPB measure have lauded it as essential for consumer protection. A financial reform advocacy organization, Better Markets, appreciated the notion of incorporating new payment technologies under regulatory scrutiny to safeguard the increasingly prevalent American users.
Closely observing these progressions is the crypto sector. Smith from The Blockchain Association interprets the Senate's actions as promising for impending crypto legislation. 'This outcome could signal favorable prospects for developing and enacting stablecoin as well as market structure regulations,' she observed.
Operating without central mediators, DeFi protocols leverage smart contracts for financial service automation. Proponents within the industry assert that conventional reporting requirements, tailored for centralized systems, are impractical for these decentralized setups.
The Congressional Review Act extends limited capacity to Congress to reverse regulations formulated in the final phase of a preceding administration. This tactic was similarly adopted during Trump's initial administration to retract rules from the Obama era.
The present initiatives have secured bipartisan approval within the Senate, with a 70-27 vote on the IRS rule repeal, underscoring significant backing from both Republican and Democratic factions, indicating a growing agreement on certain crypto policy narratives.
Editor-in-Chief of Blockonomi and an entrepreneurial force behind Kooc Media, a UK-centric online media platform. Advocates for Open-Source Software, Blockchain Innovations, & advocates for an Unrestricted and Equitable Internet for everyone.
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