Trump Repeals Biden-Era Tax Rule, Easing DeFi Reporting Burden

President Donald Trump has signed a resolution to repeal a controversial tax rule that was finalized towards the end of the Biden administration. This rule required decentralized finance (DeFi) platforms to collect and report user data to the tax agency, similar to how traditional brokers operate. The resolution, which had strong bipartisan support, was introduced by Republican Senators Ted Cruz of Texas and Mike Carey of Ohio.

The rule, known as the "Gross Proceeds Reporting by Brokers That Regularly Provide Services Effectuating Digital Asset Sales," expanded the definition of "broker" to include non-custodial entities like DeFi platforms and trading front-end service providers. Under this expanded scope, DeFi projects were required to report gross proceeds from crypto sales and collect taxpayer data, including identities and transaction histories.

The resolution, also called H.J.Res.25, will render the IRS’ rule void, immediately repealing requirements for DeFi platforms and digital asset brokers to report sales proceeds on Form-1099. The repeal means that the rule will have "no force or effect," allowing the IRS to focus on its existing duties and obligations to American taxpayers.

Prominent industry leaders had objected to the IRS rule change when it was announced, stating that it would destroy the DeFi ecosystem in the United States. Decentralized Finance protocols run on automated code and are generally incapable of complying with stringent tax reporting requirements designed for more traditional brokers. The Trump administration was critical of the new rule and threw its weight behind the measure to repeal it.

Crypto policy leaders hailed the decision to eliminate the rule, which could have become a major hurdle in the industry’s trajectory. The repeal of this rule is seen as a significant victory for the crypto industry, as it allows DeFi platforms to continue operating without the burden of stringent tax reporting requirements.