Overturning IRS DeFi Broker Rules

Supporters: Difficult to Enforce, Could Stifle Innovation

Opponents: Should Be Subject to Regulations Similar to Stock Trading

IRS May Be Permanently Banned from Creating Similar Rules

The majority of members of the U.S. House of Representatives voted to overturn a regulation by the IRS that classified decentralized finance (DeFi) platforms as brokers, requiring them to collect specific taxpayer and transaction information.

According to CoinDesk, the House passed the Congressional Review Act resolution with a bipartisan majority of 292 votes in favor and 132 against. This resolution overturned the rule finalized during the final days of the Biden administration. The resolution was previously approved by the Senate, but due to budget rules, the House must pass it again, and it will need President Donald Trump’s signature to take effect.

Supporters: Difficult to Enforce, Could Stifle Innovation

Republican Representative Jason Smith of Missouri urged his colleagues to support the resolution, arguing that the IRS rule could harm U.S. businesses and stifle innovation.

“There are serious doubts about whether this rule can truly be enforced… DeFi exchanges are different from centralized cryptocurrency exchanges or traditional financial institutions. DeFi platforms simply cannot collect the user information needed to enforce this rule.”

Republican Representative Tim Moore of North Carolina also stated that the rule “goes far beyond” the intent of the 2021 Bipartisan Infrastructure Investment and Jobs Act and poses a threat to digital asset innovation in the U.S.

“This rule imposes an unbearable burden on software developers, damaging the U.S.’s leadership in digital assets.”

Opponents: Should Be Subject to Regulations Similar to Stock Trading

Opponents of the resolution, including Democratic Representative Danny Davis of Illinois, believe the rule aligns with the legislative intent of the 2021 Infrastructure Act and should follow the same regulatory standards as stock trading. Danny Davis said:

“When you sell stocks through a broker, the broker reports the sales proceeds to you and the IRS. This independent reporting mechanism makes it more likely for taxpayers to report their income accurately.”

Democratic Representative Lloyd Doggett from Texas called the resolution a “special interest bill” and warned that it could be exploited by “wealthy tax evaders, drug dealers, and ### funders,” leading to an increase of $4 billion in U.S. national debt, contradicting the deficit-reduction goals promoted by the Trump administration.

IRS May Be Permanently Banned from Creating Similar Rules

The resolution has received support from both the House and the Senate and has been sent to the Senate for final deliberation. If it is ultimately approved and signed by Trump, the IRS will be permanently prohibited from creating similar rules.