US Senators Vote to Repeal Controversial IRS DeFi Broker Rule

U.S. Senators have voted to repeal an Internal Revenue Service tax rule that crypto advocates had argued imposed impossible tax obligations on decentralized finance protocols. On Wednesday, March 26, Senators voted 70-28 to pass a joint resolution to repeal the IRS rule . This is the second time that Senators voted to repeal the rule, as there was an initial vote on March 4. However, the process had to be redone due to a procedural issue. Following Wednesday’s vote, the resolution now moves to President Donald Trump’s desk, where he is expected to sign it, with backing from crypto czar David Sacks. Reacting to the development, Blockchain Association CEO Kristin Smith asserted that the crypto industry was looking forward to permanently eliminating the rule. She also thanked the resolution's drivers, Senator Ted Cruz and Representative Mike Carey, for their efforts. https://twitter.com/BlockchainAssn/status/1905061648127123533 The DeFi Broker Rule The rule in question was an amendment to income tax regulations passed during the tail end of the Biden administration that crypto industry participants have since dubbed the "DeFi broker rule." This is because the IRS expanded its definition of a broker to include "front-end service providers" for digital asset transactions. As a result, the IRS required DeFi projects to adhere to the same transaction reporting rules as traditional Wall Street brokers. These projects would have been required to send users tax forms to ensure compliance with taxes on transactions. However, many in the crypto space quickly argued that this would be burdensome and nearly impractical for DeFi projects. For one, it would have required these projects to tie every wallet address to real-world identities, which, beyond being burdensome, would have irked privacy advocates in the space. At the same time, the functions of most DeFi projects are automated by smart contracts with little to no human supervision.