DeFi Platforms Exempt From IRS Reporting Mandates After Rule Repeal

The Internal Revenue Service (IRS) has officially repealed a controversial rule that required decentralized finance (DeFi) platforms to report customer transaction information to the US government for tax purposes. This move, effective July 10, 2025, was enabled by bipartisan Congressional action and the signature of President Trump. The repealed rule, outlined under Section 6045, had specified how DeFi exchanges would report customer transaction information, treating both centralized and decentralized crypto platforms as brokers obligated to report customer trades to combat tax evasion.

The rule, created under the enforcement provisions of the 2021 Infrastructure Investment and Jobs Act, had faced significant opposition from DeFi proponents. They argued that DeFi platforms lack the capability to capture or verify user information, making compliance impractical and an unreasonable burden. Industry groups lobbied against the expansion, asserting that it would stifle innovation and drive projects overseas. The repeal was passed by both the Senate and the House, demonstrating strong bipartisan opposition. On April 11, President Trump signed a bill reversing the expanded IRS crypto brokers rule, which would have placed a significant burden on developers and front-end teams.

The official withdrawal of the rule by the Department of the Treasury clarifies that Congress intended for broker reporting to apply specifically to custodial, intermediary exchanges. This action does not preclude future rulemaking that might be specifically adapted to non-custodial and decentralized entities. For now, the crypto industry views this as a significant victory, as it lifts the reporting mandates for decentralized platforms. The repeal was the result of earlier legislative action through the Congressional Review Act, which overturned the revised IRS rule that broadened the definition of “broker” to include DeFi platforms. The controversial rule required DeFi platforms to issue IRS 1099-DA forms for all user transactions, a requirement that has now been formally rescinded.

Centralized exchanges are still subject to new reporting requirements starting in 2026. They continue to prepare by enhancing know-your-customer data collection, highlighting regulatory distinctions within the financial sector. While immediate financial shifts are unclear, historical trends indicate growing DeFi market confidence with decreased reporting demands. This may lead to increased activity and growth within decentralized protocols. The IRS's decision may lead to increased trading volumes and market activity as fears diminish over non-compliance with the repealed regulation. DeFi continues to evolve as clarity and favorable perspectives in regulatory landscapes emerge.

Key players in this regulatory change include the IRS, the Treasury, and President Trump, who executed the repeal. The repeal, enabled by House Joint Resolution 25, removes the broker classification for DeFi protocols, cited as impractical by crypto advocates. The rule's removal could stimulate DeFi market growth by lessening fears of compliance burdens. Positive sentiment is expected for DeFi market participants, as the repeal may lead to increased trading volumes and market activity as fears diminish over non-compliance with the repealed regulation. DeFi continues to evolve as clarity and favorable perspectives in regulatory landscapes emerge.