Is there a turning point in the regulation of Decentralized Finance? US lawmakers seek to abolish the broker rules of the IRS

Source: cryptoslate

Compilation: Blockchain Knight

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

Fox Business reporter Eleanor Terrett revealed on March 4 that Republican Senator Ted Cruz is leading the push to introduce this CRA. The initial vote was originally scheduled for March 5, but could have been postponed due to scheduling conflicts, including the upcoming State of the Union address.

According to Terrett, “This CRA, if passed by a simple majority vote in both the House and Senate, would repeal broker rules for the IRS, which is part of the U.S. Treasury Department. The rule expands the definition of “broker” to include DeFi developers. Proponents of the CRA say the current rules are not appropriate for the unique nature of DeFi.”

The IRS broker rules were finally finalized last year, imposing new tax reporting 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 backed the move, while David Sacks, head of Crypto Asset Affairs, issued a public statement on Tuesday saying that “the so-called broker DeFi rules are a last-minute attack on the Crypto community by the Biden administration.”

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 towards Crypto assets; this vote will be the decisive first test of this theory.”

At the same time, the removal of the rule would be consistent with the Donald Trump administration’s broader pro-crypto asset stance and strengthen the growing influence of pro-crypto asset lawmakers.