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Key Takeaways:
- U.S. legislators are challenging the IRS broker rule, contending that it imposes excessive compliance requirements on DeFi platforms and hinders cryptocurrency innovation.
- Senator Ted Cruz and cryptocurrency supporters aim to repeal the rule, which detractors claim inaccurately categorizes software developers and infrastructure providers as brokers.
- The Congressional vote on this regulation could influence the future of DeFi and digital asset policies in the U.S., with wider ramifications for cryptocurrency regulation.
U.S. lawmakers are taking steps to repeal the Internal Revenue Service’s (IRS) new broker rule, which mandates decentralized finance (DeFi) platforms to gather and report user information.
This initiative, led by Republican Senator Ted Cruz, is being pursued under the Congressional Review Act (CRA), a legislative mechanism that allows Congress to nullify recent federal regulations.
IRS Crypto Reporting Rule Faces Congressional Challenge
Fox Business reporter Eleanor Terrett disclosed on March 4 that Cruz is leading the CRA resolution, which was initially set for a vote on March 5.
However, scheduling conflicts, including the forthcoming State of the Union address, may delay the vote.
NEW: White House Crypto and AI Czar @davidsacks47 endorsing the rollback of the IRS broker rule set to be deliberated on in the Senate today. https://t.co/XCruLVms2q
— Eleanor Terrett (@EleanorTerrett) March 4, 2025
If passed with a simple majority in both the House and Senate, the CRA would nullify the IRS rule and broaden the definition of a “broker” to include DeFi developers and front-end operators.
Critics notably argue that the rule is misaligned with the essence of decentralized finance and imposes significant compliance burdens on the industry.
The broker rule, finalized last year, already extends the definition of a “broker” to encompass DeFi developers, front-ends, and other entities facilitating digital asset transactions.
It enforces tax reporting requirements, Know Your Customer (KYC) measures, and compliance obligations for platforms handling digital assets, including non-fungible tokens (NFTs) and stablecoins.
Senator Cruz, however, condemned the regulation as an attempt by the Biden administration to suppress cryptocurrency development in the U.S.
“In a midnight move, the Biden administration issued their decentralized finance rule, which directly and immediately would harm American cryptocurrency innovation and drive development overseas,” Cruz stated.
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Cruz further remarked, “This week Congress will vote on my resolution to rescind that regulation. I am confident we will.”
Crypto advocates contend that the IRS rule is inappropriate for the DeFi sector, as it categorizes software developers and infrastructure providers as brokers.
Significantly, the White House, through Crypto Czar David Sacks, has backed the initiative to revoke the rule.
On Tuesday, Sacks referred to the IRS regulation as a “so-called Broker DeFi Rule, an Eleventh-hour attack on the crypto community by the Biden administration.”
As lawmakers seek to reverse federal agency decisions, the outcome of this vote could establish the framework for future digital asset regulation in the U.S.
U.S. Lawmakers Push to Overturn CFPB Rule as Crypto Regulation Fight Intensifies
In addition to the IRS broker rule challenge, legislators are also targeting a Consumer Financial Protection Bureau (CFPB) regulation concerning digital payment applications.
Senator Pete Ricketts has introduced a resolution to overturn the rule, which critics argue unfairly limits fintech companies providing digital wallets and payment services.
“The Biden administration did everything it could to stifle financial innovation, threatening to drive digital asset firms abroad,” stated Senate Majority Leader John Thune.
“The Senate is working to undo these burdensome regulations separately to restore financial freedom for the American people,” he added.
A similar resolution has already progressed in the House. If both chambers approve it, the president will make the final decision.
Meanwhile, crypto advocacy groups, led by The Blockchain Association, continue to oppose the IRS rule. They argue that classifying DeFi infrastructure as financial intermediaries misinterprets the technology and exceeds regulatory authority.
Supporters, however, maintain that the rule is essential for tax compliance. The final decision could influence the future of DeFi regulation in the U.S.
As it currently stands, especially with the White House crypto summit approaching on March 7, the outcome of these events may set the stage for further policy discussions or provide much-needed clarity.
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