Senate Rejects IRS DeFi Rule
Senate Rejects IRS DeFi Rule: A Win for DeFi?
The US Senate overwhelmingly voted 70-27 to pass S.J.Res.3, effectively overturning an IRS rule that threatened to significantly impact Decentralized Finance (DeFi) platforms. The resolution, spearheaded by Senator Ted Cruz, now heads to the House of Representatives for approval before reaching President Trump's desk.
- Senate Action: The Senate's decisive vote demonstrates strong bipartisan support against the IRS rule.
- White House Support: The White House officially endorsed the repeal, characterizing the original rule as a burdensome "midnight regulation" that stifled innovation and raised privacy concerns.
The Controversial IRS Rule
In December 2024, the IRS finalized a rule classifying DeFi platforms, custodial wallet providers, and various crypto services as brokers. This broad interpretation included software providing access to DeFi protocols, requiring them to report users' gross transaction proceeds. While the IRS aimed to improve tax compliance, the crypto industry widely opposed it, arguing it was an overreach that ignored DeFi's decentralized nature and was technically infeasible to implement.
Industry and Congressional Reaction
The Blockchain Association, along with over 75 industry members including Coinbase, a16z, Paradigm, Kraken, Uniswap, and Anchorage Digital, actively campaigned for the repeal. David Sacks, Trump's AI & Crypto Czar, called the rule an "11th-hour attack on the crypto community." The Senate's vote has been hailed as a victory for DeFi, with Kristin Smith, CEO of the Blockchain Association, calling it a "big day for DeFi."
What Happens Next?
This repeal effort utilizes the Congressional Review Act (CRA), allowing Congress to overturn executive regulations within a specific timeframe. If S.J.Res.3 passes the House and is signed into law by President Trump (which is highly anticipated), the IRS would be prevented from issuing a similar rule without further congressional approval. The House vote is expected in the coming weeks.
Potential Implications and Concerns
While celebrated by the crypto industry, the IRS estimated that repealing the rule could result in a $3.9 billion loss in tax revenue over a decade. Concerns remain about potential tax compliance issues and the risk of crypto becoming a haven for illicit activities. The upcoming White House Crypto Summit on March 7th will likely shed more light on the administration's overall approach to crypto regulation.
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