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In a major win for the crypto industry, the U.S. House of Representatives is moving to dismantle the IRS’s controversial DeFi broker regulation, which critics argue threatens innovation and decentralization. The proposed repeal signals a growing push to ensure that decentralized finance (DeFi) remains free from overreaching tax requirements.
What Is the IRS DeFi Broker Rule?
The rule, introduced as part of the Bipartisan Infrastructure Law of 2021, seeks to classify DeFi platforms, validators, and miners as “brokers”—requiring them to report user transactions to the IRS. This means that even decentralized protocols and smart contracts could face onerous tax reporting obligations, which critics say are unworkable and stifle innovation.
Why Is Congress Pushing Back?
A bipartisan group of lawmakers argues that the rule:
- Misclassifies DeFi participants – Unlike centralized exchanges (like Coinbase), DeFi protocols do not directly facilitate transactions in a way that aligns with traditional broker definitions.
- Threatens decentralization – By forcing compliance on decentralized networks, the rule could make it nearly impossible for DeFi platforms to operate legally in the U.S.
- Pushes crypto innovation overseas – If enforced, the regulation could drive DeFi developers and investors to jurisdictions with more crypto-friendly policies.
Industry Response
Crypto advocates, including Coinbase, Blockchain Association, and Coin Center, have strongly opposed the rule, arguing that it violates privacy rights and places an undue burden on the DeFi ecosystem. Many also claim that forcing decentralized networks to comply is technically impossible, as they lack centralized entities to report transactions.
The House’s move to overturn the rule is expected to face challenges in the Senate, where crypto regulations remain a hotly debated topic. However, with growing bipartisan support for clear and fair crypto policies, the effort to eliminate or revise the rule is gaining traction.
The battle over the IRS’s DeFi broker rule highlights the ongoing tug-of-war between regulators and the crypto industry. While the House’s efforts signal a pro-crypto shift in Washington, the fight for sensible DeFi regulations is far from over.
