Senate Votes to Repeal IRS DeFi Rule, Awaits Trump's Signature

The US Senate has voted in favor of a motion to repeal an IRS rule targeting decentralized finance (DeFi) platforms. The motion now heads to President Donald Trump’s desk for his anticipated signature. The resolution is close to becoming law, potentially by the end of this week. On March 26, the Senate voted 70-28 to pass H.J. Res. 25, introduced by Senator Ted Cruz and Representative Mike Carey. This vote marks the second time this month that the resolution has passed, following a 70-27 vote on March 4. A procedural requirement regarding budget measures necessitated the re-vote after the House approved its version in a 292-132 tally.

If Trump signs the Congressional Review Act (CRA), it would be the first bill related to cryptocurrency to become law. Notably, earlier this month, David Sacks, White House’s AI and crypto czar, had declared support for the resolution. “If S.J. Res. 3 were presented to the President, his senior advisors would recommend that he sign it into law,” he posted. If passed, the resolution would mark a significant win for the cryptocurrency industry and a step toward reducing regulatory oversight in the DeFi sector.

The development comes amid a broader push for regulatory clarity. On March 26, the DeFi Education Fund, alongside a coalition of organizations, submitted a letter to leading US Senate and House Committees on Banking, Judiciary, and Financial Services members. The letter aims to address the Department of Justice’s (DOJ) misinterpretation of money transmission laws. “We write to urge you to correct the Department of Justice’s (DOJ) unprecedented and overly expansive interpretation of the criminal code provision proscribing operating an “unlicensed money transmitting business” as applied to software developers,” the letter read.

The coalition argues that the DOJ’s interpretation creates ambiguity. This could criminalize software developers working in the blockchain space. Specifically, it would impact those using non-custodial technologies who do not control or possess customer funds. This position could threaten the viability of US-based software development in the digital asset industry and beyond. Furthermore, the letter emphasizes that the DOJ’s stance contradicts existing guidance from the Financial Crimes Enforcement Network (FinCEN) and previous legal interpretations. Thus, it could potentially lead to overreach and unfair treatment of blockchain developers.

The signatories, including Paradigm, A16z Crypto, Polygon Labs, Coinbase, Kraken, and others, request that Congress urge the DOJ to clarify its position. They aim to ensure alignment with legal precedent and congressional intent and prevent the stifling of innovation in the US tech sector.