U.S. House Moves to Block IRS DeFi Tax Rule in Major Crypto Win

The U.S. House of Representatives has taken a key step to overturn an IRS rule that imposes strict tax reporting on decentralized finance (DeFi) platforms. The House Ways and Means Committee voted 26-16 in favor of a resolution to nullify the IRS policy under the Congressional Review Act. The measure now moves to the full House and, if approved by both chambers, requires a presidential signature to take effect.

The IRS rule, introduced in December, mandates DeFi protocols to comply with broker-style tax reporting, a move that industry leaders argue is impractical and harmful to the sector. Last week, nearly every major crypto firm backed a Blockchain Association letter urging Congress to repeal the regulation. Critics warn that the rule extends beyond brokers, potentially affecting non-custodial platforms and developers.

Republican lawmakers, including Rep. Mike Carey and Sen. Ted Cruz, are leading the charge to dismantle the IRS rule, arguing it would overwhelm both taxpayers and the agency. Carey described it as a “nightmare,” while Rep. Jason Smith accused the IRS of overstepping its authority in the final days of President Biden’s term.

Democratic Rep. Richard Neal defended the rule, emphasizing its role in ensuring tax compliance and preventing crypto investors from bypassing tax obligations. Repealing the rule would reportedly cost the U.S. government $3.9 billion in lost tax revenue over a decade.

The debate underscores the growing tensions between regulators and the crypto industry, as lawmakers weigh tax enforcement against fostering innovation. If the resolution passes, it would mark a significant victory for DeFi advocates fighting against regulatory overreach.