Senate Overturns IRS DeFi Reporting Rule, Heads to Trump

The Senate voted 70-28 on Wednesday to support a resolution overturning a Biden-era rule proposed by the IRS, which would have required decentralized finance (DeFi) platforms to collect and report taxpayer information. Critics argued that the rule was "fundamentally unworkable" because DeFi platforms operate through automated blockchain code with no human oversight or visibility into user identities.

Efforts to repeal and revise the IRS broker rule began in January, with the U.S. House of Representatives signaling consideration by February. The Trump administration supported the repeal, leading the Senate to act on March 4. However, the process was temporarily delayed due to a "blue slip" issue, where the House raised constitutional concerns over how budget matters are handled and argued that the repeal should have originated there.

A parallel version of the resolution passed the House earlier this month with a 292-132 bipartisan vote. The resolution is now headed to the White House, where President Donald Trump is expected to sign it.

Concerns about the IRS broker rule emerged earlier this month, with U.S. Treasury Secretary Scott Bessent stating that his office would work closely with the IRS and the Office of the Comptroller of the Currency (OCC) to "rescind and amend" related crypto tax rules that have impacted the operations of crypto and digital asset firms in the U.S.

The rule’s language regarding "DeFi brokers" as "front-end service providers" for digital asset transactions has raised issues. Commissioner Hester Pierce criticized the broad definitions, stating in February last year that they would be "harming" market participants who unknowingly became "dealers." By April of the same year, crypto lobbyists had sued the then-Gensler-led SEC over these sweeping definitions. The DeFi Education Fund also warned that the IRS broker rule's requirements could "push this entire, burgeoning technology offshore."