Senate passes resolution to abolish IRS's contentious regulation on crypto intermediaries

The U.S. Senate has approved a measure to eliminate an IRS rule that targeted decentralized finance (DeFi) platforms, paving the way for the president's anticipated signature.

On March 26, the Senate voted 70-28 in favor of revoking the contentious DeFi broker rule, which aimed to widen tax reporting obligations for enterprises in this field. This decision comes after the House of Representatives passed the resolution earlier this month with bipartisan support.

Republican Representative Mike Carey, a prominent critic of the bill, denounced it as a "massive government overreach" that would infringe on American citizens' privacy and impede the industry's growth.

The resolution now advances to President Donald Trump's desk for final approval. David Sacks, the White House's crypto and AI advisor, has previously confirmed the administration's support for the measure, and Trump is anticipated to sign it into law.

The rules, initially suggested by the IRS and the U.S. Treasury Department in August and finalized in December 2024, would mandate DeFi platforms to report user transactions to the IRS, specifically gross proceeds from crypto sales, similar to traditional brokers.

This would entail collecting and submitting personal data of users involved in these transactions, which critics argue goes against the essence of decentralization and exerts undue pressure on platforms that often lack central operators.

Proponents of the repeal contended that the rule was impractical and could drive innovation away from the U.S.

The Blockchain Association, a digital asset advocacy group, along with the Texas Blockchain Council, filed a lawsuit against the IRS last year.

Marisa Coppel, the association's Head of Legal, criticized regulators in a joint statement last year, alleging that the IRS and Treasury had "overstepped their statutory authority in expanding the definition of 'broker.'"

"Not only is this an encroachment on the privacy rights of individuals using decentralized technology, it would push this entire, burgeoning technology offshore," he added.