US House of Representatives Votes to Repeal IRS DeFi Broker Rule

A Bipartisan Effort to Halt IRS Reporting Requirements for DeFi Platforms

The US House of Representatives has voted to repeal the controversial IRS DeFi broker rule, which would have imposed reporting requirements on decentralized finance (DeFi) protocols. On March 11, the motion to nullify the rule passed with a significant bipartisan majority, securing 292 votes in favor and 132 against. All of the votes in opposition came from Democrats, with 76 members of the party joining Republicans in supporting the repeal.

This move follows a similar vote in the US Senate on March 4, where the motion to repeal the rule passed by a wide margin of 70 to 27. The next step for the resolution is another vote in the Senate, after which it will be sent to President Donald Trump, who has indicated his support for the repeal.

The DeFi Broker Rule and Its Controversy

The IRS DeFi broker rule, introduced as part of broader efforts to expand cryptocurrency reporting requirements, would have required decentralized finance platforms—including decentralized exchanges (DEXs)—to report gross proceeds from crypto sales and disclose the identities of taxpayers involved in those transactions. The rule was intended to ensure that the IRS had access to information about crypto transactions conducted on decentralized platforms, similar to existing reporting requirements for traditional financial institutions.

However, the rule faced significant opposition from both sides of the political spectrum. Critics argued that it would violate the privacy of American citizens, impose burdensome compliance requirements on the DeFi industry, and potentially stifle innovation in the rapidly growing sector.

Support for Repeal: Privacy Concerns and Industry Impact

Republican Representative Mike Carey, who spearheaded the repeal motion, strongly criticized the DeFi broker rule, stating that it “invades the privacy of tens of millions of Americans” and could hinder the growth of the DeFi industry in the US. Carey warned that the rule would overwhelm the IRS, which is already grappling with significant enforcement challenges.

House Financial Services Committee Chairman French Hill also applauded the vote, calling the rule a “clear example of government overreach.” He warned that if implemented, the rule could drive digital asset development overseas, undermining the US's position as a leader in crypto innovation.

Opposition to Repeal: Concerns About Tax Evasion and Criminal Activity

While the repeal passed, it did not come without opposition. Some Democrats, including Representative Lloyd Doggett, argued that repealing the rule would create a dangerous loophole, making it easier for tax evasion, money laundering, and terrorist financing to occur through DeFi platforms. Doggett specifically criticized the repeal for providing a “special interest exemption” that he believed would benefit wealthy tax cheats and those engaged in illegal activities.

In a statement, Doggett warned that repealing the rule would allow “wealthy Republican donors” to use decentralized exchanges without fear of IRS scrutiny, potentially enabling illicit financial activities. However, proponents of the repeal maintained that the rule would be overly burdensome and counterproductive, particularly for innovative industries like DeFi.

White House Support for the Repeal

The Biden administration also expressed support for the repeal of the DeFi broker rule. David Sacks, the White House's crypto czar, along with officials from the Office of Management and Budget, voiced concerns about the potential stifling effect the rule could have on American innovation. They argued that the rule would impose an “unprecedented compliance burden” on DeFi companies while raising serious privacy concerns about the sharing of taxpayers' personal information.

Looking Ahead: What’s Next for the IRS DeFi Rule?

As the resolution now heads back to the Senate for a final vote, its passage could mark a significant victory for DeFi platforms and crypto advocates who have long argued against excessive regulation. If the resolution passes the Senate and is signed by President Trump, the IRS DeFi broker rule will be effectively repealed, removing the reporting obligations that many in the industry saw as a threat to privacy and innovation.

The ongoing debate over the rule underscores the broader tension between the need for regulatory oversight and the desire to foster innovation in the rapidly evolving DeFi and cryptocurrency sectors. With strong bipartisan support for the repeal, it appears that Congress is signaling a preference for a more balanced approach to regulating the crypto industry—one that supports privacy while addressing concerns about tax compliance and criminal activity.