According to the latest reports, the Senate has officially signed off on repealing the IRS DeFi rule first approved in early March. The U.S. Senate voted 70-28 to repeal the IRS rule targeting DeFi brokers, sending the resolution to President Donald Trump for signature. The bill passed the Senate in early ‘March but was held up procedurally before clearing Congress under the Congressional Review Act (CRA).
If signed by the president, the repeal would prevent the IRS from enforcing a broker reporting rule that the crypto industry has hated. The rule, introduced in December 2024, would have classified certain DeFi platforms as brokers and require them to report user transactions; a requirement many said was impossible for decentralized protocols.
With the Republican-controlled government reshaping digital asset policies, this could be a big moment for crypto. But what does it mean for DeFi platforms, investors and the broader crypto industry?
How the IRS Tried to Regulate DeFi—And Why It Backfired
The now-repealed broker rule came ‘from the 2021 Infrastructure Investment and Jobs Act, signed by then-President Joe Biden. It was meant to bring the crypto industry in line with traditional finance by having DeFi platforms report user activity to the Internal Revenue Service (IRS), like banks and stock brokerages.
However, crypto leaders pushed back immediately, saying the rule was: Too broad and vague meaning there’s no clarity on what made a DeFi platform a broker; Impossible to enforce as most’ DeFi protocols have no central intermediaries; A threat to U.S. crypto innovation meaning it would push blockchain developers and investors offshore.
The IRS estimated the rule would impact 650 to 875 DeFi brokers, with data collection starting in 2026 and enforcement in 2027. However, many in the crypto space said compliance would be impossible given the decentralized nature of the industry.
The Political Shift: Trump Administration Sides with Crypto
Under the Biden administration, the IRS and Treasury Department said the rule was needed to stop tax evasion in the digital asset space. However, industry stakeholders said crypto transactions already became visible for tax purposes when converted to fiat and withdrawn to bank accounts.
With the Trump administration’s pro-crypto stance, opposition to the broker rule gained steam. David Sacks, White House crypto policy lead and senior Trump advisor, publicly supported the repeal, indicating the administration’s commitment to a more crypto-friendly regulatory environment.
This fits with a broader Republican effort to support the U.S. digital asset industry, as seen in President Trump’s executive orders on blockchain.
What Happens If Trump Signs the Repeal into Law?
If President Trump approves the repeal, it will invalidate the IRS DeFi broker rule, which means: DeFi platforms are free from direct IRS reporting requirements, no more compliance headaches; Crypto innovation in the US stays competitive, developers won’t have to move out of the country due to regulations; Regulatory uncertainty remains, lawmakers will revisit digital asset taxation and oversight soon.
Nevertheless, the repeal doesn’t mean DeFi transactions are tax free, crypto traders and investors still have to report gains and losses when converting digital assets to fiat.
Potential Risks: Could the IRS Introduce a New DeFi Reporting Rule?
While this repeal blocks the current broker rule, it doesn’t prevent future IRS regulations on DeFi. Lawmakers could propose a revised broker definition, clearer guidelines on which platforms must comply, Alternative tax enforcement, tighter bank-level monitoring of crypto transactions, Stronger KYC, and harder for DeFi users to remain anonymous.
Given the ongoing debate on crypto regulation, this repeal might be a temporary win for the industry rather than a permanent solution.
Conclusion: Crypto Rules Are Changing
The Senate’s repeal of the IRS DeFi broker rule is a big shift in US crypto regulation, the government is willing to reevaluate policies that could strangle blockchain innovation. With President Trump expected to sign this, this could be the first of many pro-crypto policy changes under his administration.
However, regulatory uncertainty remains. As crypto adoption grows, the US will still need to define a long-term strategy for tax compliance and oversight in DeFi. The repeal is a win for now, but the fight over crypto regulation is far from over.
FAQs
What was the IRS DeFi broker rule?
The IRS DeFi broker rule was meant to classify certain DeFi platforms as brokers, requiring them to report user transactions to the IRS, like traditional financial institutions.
Why did the Senate repeal the rule?
The rule was too broad and unworkable. It also would have pushed crypto innovation offshore.
What happens if Trump signs the repeal?
If signed into law, DeFi platforms won’t have to report to the IRS, but investors still have to report crypto gains for tax.
Does this mean DeFi is regulation-free?
No. This rule is being repealed but future DeFi regulations are still possible.
How does this affect US crypto investors?
US crypto investors will still have to report gains and losses, but DeFi protocols won’t have to report user activity to the IRS.
Glossary
DeFi (Decentralized Finance): Financial system built on blockchain that doesn’t have banks.
IRS (Internal Revenue Service): US government agency that collects taxes.
CRA (Congressional Review Act): Law that allows Congress to repeal federal regulations within a time frame.
KYC (Know Your Customer): Regulatory ‘process that requires financial institutions to verify customer identities.
Fiat Currency: Government-issued currency (e.g., USD) not backed by a physical ‘commodity.
References
For advertising inquiries, please email . [email protected] or Telegram
