Trump Repeals Biden-Era IRS Rule Targeting DeFi Platforms

President Donald Trump has signed a resolution that nullifies an IRS rule aimed at decentralized finance (DeFi) platforms. This rule, introduced in the final days of the Biden administration, sought to expand the definition of "broker" to include non-custodial entities like DeFi platforms and trading front-end service providers. The rule would have required these platforms to report gross proceeds from crypto sales and collect taxpayer data, including identities and transaction histories.

The resolution, known as H.J.Res.25, was introduced by Senator Ted Cruz and Representative Mike Carey in December. It aims to void the IRS’ “Gross Proceeds Reporting by Brokers That Regularly Provide Services Effectuating Digital Asset Sales.” The measure cleared the Senate on March 4 and passed the House the following week. However, due to its linkage to a budgetary matter, a concluding vote in the Senate was necessary before its transmittal to the President. On March 26, the Senate voted to repeal the controversial crypto tax rule.

The enactment of this resolution means the rule will have no force or effect, immediately repealing requirements for DeFi platforms and other digital asset brokers to report gross proceeds of sales on Form-1099. This repeal reduces compliance burdens that were criticized as impractical and innovation-stifling by many members of the crypto sector, including the Blockchain Association.

The rule was seen as burdensome and unworkable, potentially crippling the digital asset industry and stifling innovation. It required DeFi brokers to file a Form 1099-DA, subjecting them to the same reporting rules as brokers for securities and operators of custodial digital asset trading platforms. However, DeFi brokers operate differently from traditional securities brokers, as they are not centralized and do not collect the information needed to comply with this rule.

The Joint Resolution passed both the House and Senate with strong bipartisan support and was backed by a broad coalition of stakeholders concerned about the impact of the ill-advised Biden IRS rule on taxpayers and the future of digital assets. The resolution effectively repeals the rule submitted by the Treasury relating to “Gross Proceeds Reporting by Brokers That Regularly Provide Services Effectuating Digital Asset Sales.” It also clears the way for Congress to enact the Trump Administration’s desired policy related to DeFi brokers.

Ways and Means Committee Chairman Jason Smith praised the move, stating that the resolution ends the Biden Administration’s DeFi Broker rule that went beyond the scope of the law. Representative Mike Carey also commended the action, noting that the DeFi Broker Rule needlessly hindered American innovation and infringed on the privacy of everyday Americans. He thanked President Trump for signing this important bill into law and for supporting America’s continued place as the global leader in the emerging crypto industry.

The repeal of this rule is seen as a significant victory for good governance and American innovation. It restores common sense, protects American innovation, and reaffirms that it is Congress, not unelected IRS bureaucrats, that writes our tax laws. The resolution gives the IRS an opportunity to return its focus to the duties and obligations it already owes to American taxpayers instead of creating a new series of bureaucratic hurdles.