Senate Poised to Vote on Repeal of IRS DeFi Reporting Rule
Staff Writer • 2025-03-03
Lawmakers Aim to Balance Innovation with Tax Compliance in Cryptocurrency Sector The U.S. Senate is preparing to vote on a resolution to repeal an Internal Revenue Service (IRS) rule that mandates decentralized finance (DeFi) platforms to report user transactions. Critics argue this regulation could stifle innovation within the DeFi sector, impose undue burdens on decentralized systems, and raise privacy concerns. The upcoming vote seeks to strike a balance between fostering innovation in the cryptocurrency industry and ensuring tax compliance and consumer protection. Background on the IRS Rule In December 2024, the IRS finalized a rule requiring DeFi platforms to report user transactions, similar to traditional financial brokers. This rule mandates that DeFi operators collect and report detailed user information, including gross proceeds from digital asset sales, to the IRS. The regulation is part of a broader effort to enhance tax compliance within the rapidly growing digital asset sector. House Committee's Response On February 26, 2025, the House Ways and Means Committee voted to advance a resolution aimed at repealing the IRS rule. Proponents of the repeal argue that the rule represents regulatory overreach and could overwhelm both taxpayers and the IRS with additional paperwork. Representative Mike Carey, who introduced the resolution alongside Senator Ted Cruz, stated that the rule would "overwhelm" the IRS with forms and burden American taxpayers. Industry Opposition The IRS rule has faced significant opposition from the cryptocurrency industry. Critics contend that the regulation is unworkable for DeFi platforms, which often operate without centralized control and do not collect user data by design. Miller Whitehouse-Levine, CEO of the DeFi Education Fund, welcomed the decision to repeal the rule, arguing that it represents an "unlawful and unconstitutional overreach" that undermines financial privacy and stifles innovation in decentralized finance. Privacy and Innovation Concerns Opponents of the IRS rule also express concerns over privacy implications. They argue that requiring DeFi platforms to collect and report user identities contradicts the fundamental ethos of decentralized finance, which emphasizes user anonymity and autonomy. There is a fear that such regulations could stifle innovation and push developers to operate in jurisdictions with more favorable regulatory environments. Next Steps The resolution to repeal the IRS rule will proceed to the full House of Representatives for a vote. If passed, it will then move to the Senate and, subsequently, to President Donald Trump for approval. Given the administration's pro-digital asset stance, it is anticipated that the resolution would receive presidential approval if it reaches that stage. Balancing Regulation and Innovation The upcoming Senate vote underscores the ongoing debate between fostering innovation in the rapidly evolving cryptocurrency sector and ensuring regulatory measures are in place to protect consumers and maintain tax compliance. Lawmakers face the challenge of crafting policies that encourage technological advancement without imposing undue burdens on emerging financial technologies. This is a developing story. Updates will be provided as more information becomes available.
See More Posts
A look at how NFTS, Web 3, Gaming, Cryptocurrencies and Blockchain are reshaping businesses across the globe.
@NFT Today Magazine
