Senate Repeals IRS DeFi Reporting Rule 70-28

The U.S. Senate, on March 26, 2025, voted to repeal an Internal Revenue Service (IRS) regulation that would have required decentralized finance (DeFi) platforms to report user transactions. The resolution, which passed with a bipartisan vote of 70-28, is now on its way to President Donald Trump’s desk for his signature. If signed into law, this repeal could significantly impact the cryptocurrency market and the future of financial regulation in the United States.

This IRS rule, introduced under the Biden administration as part of the 2021 Infrastructure Bill, aimed to classify DeFi platforms as brokers, mandating them to report user transactions. Proponents of the rule argued that it would enhance tax compliance and close loopholes in digital assets. However, opponents contended that it would impose an unfair burden on decentralized platforms, which do not operate like traditional financial institutions.

Legislators from both major political parties opposed the IRS rule, asserting that DeFi platforms, lacking centralized intermediaries, could not comply with such regulations. Senator Ted Cruz (R-TX) and Representative Mike Carey (R-OH) sponsored the repeal bill under the Congressional Review Act, which allows Congress to reverse federal regulations by a majority vote. The Senate initially voted to cancel the IRS rule on March 4, with 70 votes in favor and 27 against. Due to budget-related rules, the House created its version and passed it with 292 votes to 131. The Senate then approved this House version, demonstrating strong bipartisan support.

The cryptocurrency industry welcomed the Senate’s decision, viewing it as a significant victory for decentralized finance. The Blockchain Association, representing 76 crypto companies, strongly advocated for the repeal, arguing that the rule was impractical and would require DeFi platforms to collect user data, which is technically infeasible for decentralized systems. The CEO of the Blockchain Association, Kristen Smith, expressed her support for the move, stating that the repeal would allow American DeFi and crypto innovators to continue building the next generation of internet and financial infrastructure.

Supporters of the repeal believe that canceling the IRS rule will reduce unnecessary regulations on DeFi platforms, fostering more innovation and growth in the U.S. crypto industry. Critics, however, argue that repealing the rule could facilitate tax evasion and hinder efforts to combat illegal activities in the digital asset space. Democratic Representative Lloyd Doggett opposed the resolution, claiming it was a “special favor” that exempts certain groups from IRS rules, potentially making tax evasion and money laundering easier, especially for wealthy donors using decentralized exchanges.

The Senate’s repeal of the IRS DeFi broker rule marks a pivotal moment in the intersection of cryptocurrency and regulatory policy. While it affirms the promotion of innovation in the growing DeFi market, it also raises important questions about balancing innovation with the need for effective regulation and tax compliance in the digital era. The repeal now awaits President Trump’s signature to become law. Given his administration’s supportive stance toward the crypto space, it is expected that he will sign the repeal shortly. This action would signify a significant shift in the regulatory environment for DeFi platforms, potentially setting a precedent for future crypto-based legislation.