U.S. Lawmakers Push to Repeal Controversial DeFi Broker Rule – What’s Next?

A growing coalition of U.S. lawmakers is moving to repeal the controversial DeFi broker rule, a regulation that many in the crypto industry argue threatens innovation and imposes unrealistic compliance burdens on decentralized finance (DeFi) protocols. The proposed rollback comes amid increasing concerns that the rule could stifle growth, drive developers offshore, and hinder financial freedom in the U.S. crypto sector.

What Is the DeFi Broker Rule?

The rule, introduced as part of the Infrastructure Investment and Jobs Act (2021), sought to expand the definition of a “broker” to include DeFi platforms, validators, and even software developers involved in crypto transactions. The regulation requires these entities to collect and report user transaction data to the IRS, similar to traditional financial brokers.

Critics argue that DeFi protocols, which operate without centralized intermediaries, cannot comply with such reporting requirements, making the rule impractical and harmful to the industry.

Why Are Lawmakers Seeking a Repeal?

Bipartisan opposition to the rule has gained momentum, with lawmakers highlighting key concerns:

• Unrealistic Compliance Burdens – DeFi platforms are often autonomous smart contracts, making it impossible to track user data as required under the rule.
• Threat to Innovation – The rule risks pushing DeFi projects out of the U.S., driving blockchain developers and investors to more crypto-friendly jurisdictions.
• Lack of Clarity – Industry leaders and legal experts have warned that the regulation fails to differentiate between centralized and decentralized entities, creating legal uncertainty.

Senators and Representatives backing the repeal argue that regulatory clarity is needed, but forcing DeFi into a traditional financial framework is not the solution.

Industry Reactions

Crypto advocacy groups, including Coin Center, the Blockchain Association, and industry leaders, have welcomed the move to strike down the rule, calling it a step toward more balanced and innovation-friendly regulation. Many have urged lawmakers to craft policies that respect DeFi’s decentralized nature while addressing legitimate concerns like illicit finance and investor protection.

The push for repeal faces an uphill battle, as some regulators remain concerned about DeFi’s potential risks, including money laundering and tax evasion. However, with increasing support from lawmakers and the industry, a compromise or revised regulatory approach could emerge.

For now, the crypto industry is closely watching Washington to see whether this latest legislative effort will reshape the regulatory landscape for DeFi in the U.S.