US Senate Approves Resolution to Revoke IRS DeFi Broker Rule; Trump Expected to Sign

Senate Passes Resolution to Kill IRS DeFi Broker Rule

On March 26, the US Senate voted 70-28 to pass a resolution that would effectively revoke the Biden administration-era rule requiring decentralized finance (DeFi) platforms to report transactions to the Internal Revenue Service (IRS). The legislation now awaits President Donald Trump's signature to become law.

The IRS DeFi broker rule, which was initially introduced as part of broader efforts to regulate cryptocurrency, would have required DeFi platforms—such as decentralized exchanges (DEXs)—to report their gross proceeds from crypto sales and disclose information about the individuals involved in these transactions. The rule sought to extend existing tax reporting requirements to the rapidly growing DeFi sector, aiming to ensure compliance with US tax laws.

This resolution has garnered significant attention, especially as Trump has publicly expressed support for eliminating the rule. White House AI and crypto czar David Sacks has also indicated that Trump is expected to sign the bill once it reaches his desk. If signed into law, the move will halt the expansion of IRS reporting requirements to include DeFi platforms.

A Divisive Issue: Supporters vs. Critics

The resolution’s passage comes after both the Senate and House of Representatives passed versions of the bill, with the House voting in favor of its own version on March 11. The Senate’s decision to pass the bill was largely anticipated, as the chamber had already passed a similar measure in early March. The rule’s repeal will now move forward after clearing both legislative bodies.

Proponents of the repeal, including groups like the Blockchain Association, have celebrated the Senate’s vote. Kristin Smith, CEO of the Blockchain Association, applauded the move, calling it a victory for innovation in the DeFi space. "We look forward to taking this harmful rule off the books for good," Smith said in a statement.

Eli Cohen, the general counsel for Centrifuge, a platform focused on tokenizing real-world assets, also criticized the IRS rule. He stated that it "never made sense" and was "unworkable in practice," echoing concerns about the burden it would place on decentralized platforms.

Critics Warn of Loopholes and Increased Risk

However, opponents of the resolution argue that repealing the rule could open the door to tax evasion and money laundering. Democratic Representative Lloyd Doggett was particularly vocal about the potential risks, claiming that killing the rule would create a "loophole" for wealthy individuals and entities, such as drug traffickers and terrorist financiers, to evade taxes and engage in illicit activities.

"By allowing DeFi platforms to avoid IRS disclosures, we are essentially making it easier for tax cheats to thrive," Doggett argued, highlighting concerns that wealthy Republican donors could exploit the system.

The debate reflects the ongoing tension between promoting innovation in the crypto space and ensuring sufficient oversight to prevent financial crimes. The IRS DeFi broker rule had been championed by some lawmakers as a way to close gaps in cryptocurrency regulations, but its critics believe it could hinder the growth of DeFi technologies.

For more information on the resolution and its potential impacts on the DeFi ecosystem.

As the bill heads to Trump for final approval, the future of DeFi regulation in the US hangs in balance. The decision to revoke the IRS rule is a critical moment for the crypto community, one that could shape the regulatory landscape for years to come.