Decentralized Finance regulation ushers in a turnaround? U.S. lawmakers want to repeal the IRS's broker rule

Source: cryptoslate

Compilation: Blockchain Knight

Members of the U.S. Congress are preparing a Congressional Review Act (CRA) to challenge the Internal Revenue Service’s (IRS) broker rules that require DeFi participants to report user data to the IRS.

Fox Business Channel reporter Eleanor Terrett revealed on March 4 that Republican Senator Ted Cruz is leading the push to introduce this CRA. The initial vote was scheduled for March 5, but conflicts with upcoming events such as the State of the Union address may lead to a delay in the vote.

According to Terrett, “If this CRA is passed by a simple majority in both the House and the Senate, it will abolish the broker rule of the IRS under the U.S. Department of the Treasury. The rule expands the definition of ‘broker’ to include DeFi developers. Supporters of the CRA argue that the current rules are not suitable for the unique nature of DeFi.”

IRS broker rules were finally determined last year, imposing new tax filing requirements on entities dealing with digital assets.

The rule classifies brokers, including DeFi frontends, as entities responsible for tracking user activity, reporting transactions, and enforcing compliance measures. The rule also requires DeFi platforms to implement a Know Your Customer (KYC) process.

In addition, the regulation applies to all digital assets, including NFTs and stablecoins.

The White House supports the move, while Crypto asset manager David Sacks issued a public statement on Tuesday, calling the so-called broker DeFi rules the Biden administration’s last-minute attack on the Crypto community.

Peter Van Valkenburgh, executive director of the Coin Center, a Crypto asset think tank, criticized the rule for treating software developers and infrastructure providers as brokers.

He argues that enforcing such a measure would undermine the right to privacy, ignore bipartisan concerns, and hinder technological progress.

In light of this, Valkenburgh stressed that the results of this vote will be an early indicator of how the U.S. government approaches digital asset regulation in the coming years.

He said, “People have been talking about the new Congress taking a more friendly stance on Crypto assets; this vote will be a decisive first test of this theory.”

At the same time, repealing the rule would be consistent with the Trump administration’s broader pro-Crypto asset stance and strengthen the growing influence of pro-Crypto asset legislators.