U.S. Congress Pushes Back Against IRS's Controversial Crypto Rule

The U.S. Congress is pushing back against a controversial IRS rule that mandates decentralized exchanges and digital asset brokers to report transaction details to the IRS. On February 26, the House Ways and Means Committee voted 26-16 to advance a resolution seeking to repeal the rule before its scheduled implementation in 2027.

Originally approved by the IRS on December 5, the regulation aims to expand reporting requirements, compelling brokers to disclose cryptocurrency sale proceeds and taxpayer details. However, critics argue that enforcing such measures on decentralized platforms is impractical and represents excessive government intervention.

House Ways and Means Chair Jason Smith (R-MO) criticized the IRS tax rule, stating that it aims to “unnecessarily regulate the providers of digital wallets.” He argued that the regulation would place an undue burden on U.S.-based firms, while giving an advantage to foreign entities that are not subject to the same reporting requirements. Miller Whitehouse-Levine, CEO of the DeFi Education Fund, called the rule an “unlawful and unconstitutional overreach” and emphasized the need for its repeal to “protect Americans’ freedom of choice in how they transact.”

The effort to repeal the DeFi broker rule reflects a broader transformation in U.S. crypto regulations, driven by the Republican Party’s control of both the Senate and the House. With a surge of pro-crypto lawmakers in Congress, industry leaders speculate that the U.S. could be on the path to becoming one of the most crypto-friendly administrations in history. This shift is already evident, as the SEC has withdrawn multiple enforcement actions against crypto firms throughout February, signaling a more lenient regulatory approach.

At the World Economic Forum in Davos, Trump accused major banks, including JPMorgan Chase and Bank of America, of engaging in “politically driven de-banking.” While the banks denied any misconduct and Trump did not provide concrete evidence, his allegations nonetheless spurred a Republican-led investigation into potential financial discrimination. As the Trump administration reshapes its priorities, its impact on crypto regulations remains uncertain, leaving the industry anticipating potential regulatory relief.