Crypto Industry Pushes to Overturn IRS Rule Targeting DeFi Brokers

The Blockchain Association, backed by 75 crypto industry leaders, is urging Congress to repeal a newly implemented IRS rule that could significantly impact decentralized finance (DeFi). The rule, introduced between Christmas and New Year’s Eve, imposes strict reporting requirements on DeFi brokers, similar to those applied to traditional financial institutions.

Industry giants like Coinbase (NASDAQ: COIN), a16z, Kraken, Uniswap, and Anchorage Digital argue that the rule is an overreach that misunderstands DeFi technology. They warn it could stifle U.S. innovation while allowing foreign firms to serve American customers without the same regulatory burdens.

Senator Ted Cruz has introduced a Congressional Review Act (CRA) resolution to overturn the rule. The CRA allows Congress to repeal recent federal regulations, but once a rule is reversed, a similar measure cannot be reintroduced. This process was previously attempted with the SEC’s Staff Accounting Bulletin No. 121 but was vetoed by President Biden.

For the resolution to succeed, it must pass both chambers of Congress and receive presidential approval. With a growing number of pro-crypto lawmakers following the 2024 elections, the industry sees a strategic opportunity to push for regulatory clarity.

Crypto advocacy groups, including the DeFi Education Fund, have joined the opposition, calling the rule "unworkable" and "unconstitutional." They emphasize the need to protect DeFi from excessive regulation and maintain the U.S.’s leadership in blockchain innovation.

As Congress tackles key issues like the federal budget, the crypto industry is intensifying its efforts to ensure DeFi remains a thriving sector free from undue regulatory constraints.