TLDR
- In a significant decision, the Senate voted to nullify an IRS rule that sought to obligate DeFi services to declare tax-related information about users.
- The proposal now lands on President Trump's desk, with expectations high that he will endorse it
- Opponents of the rule criticized it as \"fundamentally unworkable,\" given that DeFi systems function automatically, sans human oversight.
- David Sacks, the White House’s authority on AI and crypto matters, stands by the decision to negate the rule.
- Organizations like the Blockchain Association and DeFi Education Fund vehemently opposed the regulation, engaging strong lobbying efforts and legal challenges.
Anticipation builds as President Trump considers signing a resolution that would revoke a rule from the Biden era, which mandated DeFi platforms to report on taxpayer activity. This follows a— U.S. Senate voted 70-28 on Wednesday moment of triumph for advocates within the cryptocurrency community, as the measure gains approval.
The definition of \"brokers\" could have broadened to encapsulate DeFi platforms. Such a change would necessitate them compiling and sending user transaction information to the IRS.
Opponents maintained that enforcing this rule would be futile. Being code-driven and blockchain-operated, these DeFi platforms do not rely on human intervention.
A core challenge is these platforms' inability to identify users effectively, rendering conventional broker reporting standards nearly impossible to meet.
The push to discard the rule saw strong bipartisan backing, with a notable contingent of Democrats aligning with their Republican counterparts.
Industry Cheers with Legislative Victory Against Restrictive Rule
A previous display of support came when the House approved a similar measure with a wide margin of 292-132 votes, adhering to constitutional guidelines on fiscal matters.
Some procedural hurdles were encountered initially, following an early March Senate approval of a resolution.
However, the House raised constitutional questions about budget handling, renewing the process by passing an independent version.
Treasury Secretary Scott Bessent disclosed plans to collaborate with the IRS and Comptroller of the Currency to propose revisions and rescind certain crypto tax policies impacting digital asset businesses.
Support for the resolution was echoed by David Sacks, the White House’s crypto specialist, who confirmed the Trump administration’s backing of the measure’s passage.
Since its inception, the rule faced resistance from industry leaders. The Blockchain Association, DeFi Education Fund, and Texas Blockchain Council joined forces to challenge it legally in December.
These organizations contended that the Treasury overstepped its jurisdiction by redefining \"broker\" too broadly, arguing that DeFi platforms do not manage user transactions or funds.
Reacting to the Senate’s decision, Blockchain Association CEO Kristin Smith expressed optimism about permanently dispensing with the punitive rule.
However, not all welcomed the repeal; Democratic Congressman Lloyd Doggett warned it might create opportunities for affluent tax evaders and illicit financiers.
Doggett described the overturn as a \"special interest loophole\" that might facilitate tax evasion and money laundering.
This measure was a component of the Biden administration's strategy to close tax loopholes tied to crypto activities, aiming to shed light on activities within the blockchain ecosystem.
Should President Trump give his expected nod, the broad \"broker\" classification will be officially rescinded from the IRS’s enforcement agenda, liberating DeFi platforms from traditional reporting burdens.
Experts in the field anticipate that this development aligns with the Trump administration’s pro-cryptocurrency stance, signaling a commitment to foster innovation within the blockchain segment.
