President Trump has signed into law a bill that repeals Internal Revenue Service (IRS) regulations that required decentralized finance (DeFi) platforms to be treated as brokers for purposes of reporting customer transactions. The former regulations, finalized in December 2024 under the Biden administration, expanded the definition of "digital asset brokers," to include certain participants that operate within the DeFi industry. Digital asset brokers are subject to tax reporting obligations similar to traditional financial intermediaries. Specifically, these brokers are required to issue IRS Form 1099-DA to both the IRS and their customers, detailing gross proceeds from digital asset transactions, as well as the name and address of each customer. Had the regulations remained in effect, DeFi brokers would have been subject to information reporting requirements for digital asset sales on or after Jan. 1, 2027.
The bill invoked the Congressional Review Act (CRA), a legislative tool allowing Congress to overturn recently enacted federal regulations, particularly those implemented late in an administration's tenure.
Advocates of the repeal argued that the former regulations were overly burdensome and misaligned with the decentralized nature of DeFi platforms. They contended that forcing DeFi protocols, which often lack a centralized entity, to comply with broker reporting standards is technically infeasible. Critics of the regulations believed it would stifle innovation and push crypto enterprises offshore, undermining U.S. competitiveness in the digital asset sector. The repeal effort was led by Sen. Ted Cruz (R-TX) and Rep. Mike Carey (R-OH).
Opponents of the repeal warned that removing these reporting requirements may create loopholes for tax evasion and illicit financial activities, including money laundering. The Congressional Budget Office, relying on estimates provided by the Joint Committee on Taxation, projected a $4.5 billion increase in the federal deficit through 2035 from passage of the resolution. Critics argued that repealing the rule may allow more cryptocurrency transactions to evade scrutiny, potentially exacerbating financial crimes.
The repeal highlights the growing political influence of the cryptocurrency industry and a broader shift in Washington's regulatory stance toward digital assets. As the larger debate unfolds, lawmakers and industry leaders will need to navigate the challenges of fostering innovation while maintaining financial security and compliance in the evolving digital economy.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
