US lawmakers move to overturn controversial IRS defi broker rule

A controversial tax rule proposed by the US internal returned service, requiring that decentralized financial brokers report cryptographic transactions, could be canceled because the legislators have prompted to repeal it.

On February 26, representatives of the American chamber advanced a resolution to eliminate the rule, with the chamber and chamber committee Vote 26-16 in favor of the repeal. The resolution is now traveling to the full house for a vote.

If he passes, the Senate will then decide on his fate. A successful vote in the Senate would send the measure to President Donald Trump, who can sign it in law or his veto. However, if it is not canceled, the rule will take effect on January 1, 2027.

The “Defi Courtier rule”, proposed by the Irs In August 2023 and officially finalized in January 2024, certain DEFI operators would require – including frontal service providers for decentralized scholarships – to collect and report user transaction data, including gross crypto sales products.

According to the IRS, it “levels the taxpayer’s playing conditions” by applying the same standards as traditional financing institutions.

However, industry leaders see it differently. Critics like the president of the Ways and Means Jason Smith Committee argue The rule is impassable for DEFI, where platforms often work without centralized control and do not collect user data by design.

Commenting on the development, Miller Whitehouse-Levine, CEO of the DEFI EDUCATION FUND, praised the decision to repeal the rule, arguing that the rule represents an “illegal and unconstitutional scope” which undermines the financial life of the Americans and stifles innovation in decentralized finance.

Defi defenders have previously raised concerns on the implications of confidentiality. Certain fear platforms such as Uniswap could be required to collect user identities, contradicting the fundamental ethics of decentralized finance.

Others, like the lawyer for consensys, Bill Hughes, consider him a last minute attempt from the previous administration to tighten the crypto before leaving his duties.

One day after the IRS finalized the rule on December 27, Kristin Smith, CEO of the Blockchain Association, described it as “unconstitutional” and warned that it could push crypto innovation offshore.

The president of Texas Blockchain Council, Lee Bratcher, echoes this concern, claiming that compliance is “practically impossible” for many in decentralized space.

The Blockchain Association, Defi Education Fund and Texas Blockchain Council have already continued the IRSAffirming that the rule would oblige developers DEFI to comply with the regulations that they simply cannot implement.

Despite the controversy, the IRS remains firm. In a joint declaration with the Treasury, the agency rejected the arguments according to which DEFI should be exempt, claiming: “People with technological expertise who operate trades or companies relating to financial services should comply with the same rules as any other person operating financial services.”