White House Backs Crypto Resolution to Overturn IRS Broker Rule

The White House has thrown its support behind a joint resolution, S.J. Res. 3, opposing the IRS Broker rule, a contentious regulation that has sparked intense debate within the cryptocurrency industry and among policymakers. This move aligns with Republican-led efforts to counter the rule's impact on innovation, privacy, and compliance challenges in the crypto space. Key lawmakers, including Texas Senator Ted Cruz and Ohio Representative Mike Carey, are leading the opposition, fueling discussions about the future of regulatory policies in the crypto sector.

The IRS Broker rule, released under the previous administration, defines any software that processes decentralized finance (DeFi) transactions as a broker. It also mandates all custodial brokers to report customer data to the Internal Revenue Service. This rule has been criticized for imposing traditional security broker rules on DeFi platforms, requiring them to deliver Form 1099 tax returns to customers. The White House, in its announcement, stated that this rule would stifle American innovation, raise privacy concerns, and impose an unprecedented compliance burden on American DeFi companies.

The crypto community has also expressed concerns about the practicality and privacy implications of this law. Some crypto services, like Uniswap, lack a clear method to collect user information, and the rule's requirements for collecting customer names and addresses have been questioned. The widespread backlash from the crypto community has added fuel to the debate over user data collection and privacy in the crypto space.

Ohio Representative Mike Carey's resolution, which seeks to overturn the IRS Broker rule, has cleared a key congressional hurdle. The resolution advanced from the U.S. House Ways and Means Committee with a vote of 26 to 16. To become law, the resolution needs to pass the full House and secure the President's signature. The White House has indicated that if the resolution succeeds in Congress, the President's senior advisors recommend signing it into law.

As the debate over the IRS Broker rule continues, lawmakers and regulators face the challenge of refining crypto tax laws without hindering technological advancements. A more tailored approach, involving customized reporting methods for DeFi, could be a better solution than applying traditional finance rules. The outcome of this resolution will significantly influence financial regulations for years to come, shaping both domestic policies and global approaches to decentralized finance.