DeFi Industry Celebrates as Congress Votes to Repeal IRS Broker Rule

DeFi Industry Celebrates as Congress Votes to Repeal IRS Broker Rule

TLDR

• Senate voted 70-28 to repeal Biden-era IRS rule requiring DeFi platforms to report taxpayer information
• The rule was criticized as “fundamentally unworkable” because DeFi platforms operate through automated code without human oversight
• After passing both House and Senate with bipartisan support, the resolution now heads to President Trump’s desk
• Treasury Secretary Scott Bessent previously indicated plans to work with IRS to rescind related crypto tax rules
• Critics argued the rule would harm innovation and push crypto technology offshore

The U.S. Senate voted 70-28 on Wednesday to overturn a controversial IRS rule that would have required decentralized finance (DeFi) platforms to collect and report taxpayer information. The resolution now heads to President Donald Trump’s desk, where he is expected to sign it as early as March 28.

The rule, finalized by the IRS in December 2023 under the Biden administration, sought to expand the definition of “brokers” to include DeFi platforms. This would have forced these platforms to implement Know Your Customer (KYC) standards and report transaction data to tax authorities.

Critics of the rule have long maintained that it was “fundamentally unworkable” for the DeFi sector. They point out that DeFi platforms operate through automated code on blockchains without human intervention or visibility into user identities.

1/🚨 New “Broker” CRA Milestone 🚨

With *another* bipartisan super majority of 70 Senators, Congress has repealed the IRS “broker” rule requiring DeFi front-ends to KYC users – ultimately reaffirming that Americans should have the freedom to decide how they transact. pic.twitter.com/AOZttE9Sio

— DeFi Education Fund (@fund_defi) March 27, 2025

The repeal effort gained momentum in early 2025. The U.S. House of Representatives began considering the measure in February, setting the stage for congressional action.

The Trump administration threw its support behind the repeal on March 4. White House AI and crypto czar David Sacks stated that Trump “strongly supports” the resolution to undo the rule.

The legislative process hit a procedural snag due to a “blue slip” issue. The House cited constitutional concerns over how budget matters are handled, arguing that the repeal should have started in the House rather than the Senate.

A parallel version of the resolution passed the House earlier this month. The bipartisan vote showed broad support with 292 lawmakers voting to overturn the rule and 132 opposing it.

Treasury Secretary Scott Bessent has indicated that his office plans to work closely with the IRS and Office of the Comptroller of the Currency. Their goal is to “rescind and amend” related crypto tax rules that impact how crypto and digital asset firms do business in the United States.

DeFi Brokers

The broker rule’s language about “DeFi brokers” as “front-end service providers” for digital asset transactions was a key point of contention. Many in the industry felt this unnecessarily broadened regulatory definitions.

Former SEC Commissioner Hester Pierce condemned the rule in February last year. She warned it would harm market participants who had unwittingly found themselves “transformed into dealers.”

By April 2024, crypto lobbyists sued the then-Gensler-led SEC over the broad language and definitions. The DeFi Education Fund warned that the requirements would “push this entire, burgeoning technology offshore.”

Blockchain Association CEO Kristin Smith celebrated the Senate vote. In a statement, she said the advocacy group looked forward “to taking this harmful rule off the books for good.”

The following statement is attributed to Blockchain Association CEO @KMSmithDC following today’s second Senate vote to roll back the DeFi broker rule: pic.twitter.com/S632l8sFAb

— Blockchain Association (@BlockchainAssn) March 27, 2025

Eli Cohen, general counsel of the RWA tokenizing platform Centrifuge, called the rule unworkable. He stated that it “never made any sense and was unworkable in practice.”

Not everyone supports the repeal. Democratic Representative Lloyd Doggett opposed the resolution, calling it a “special interest exemption” from IRS disclosures. He claimed it would make “tax evasion and money laundering so much easier.”

Doggett also argued that killing the rule would create a “loophole that would be exploited by wealthy tax cheats, drug traffickers and terrorist financiers.” These concerns did not sway the majority of lawmakers.

The crypto industry has argued that DeFi protocols lack centralized control or custodial authority over user funds. This makes traditional broker reporting requirements impossible to implement in a decentralized environment.

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