In a decisive move that has sent ripples through the cryptocurrency community, Congress has repealed the ‘DeFi Broker Rule’ established in December 2024. This rule had imposed stringent reporting requirements on decentralized finance (DeFi) platforms, categorizing them as ‘brokers’ under existing U.S. tax laws. The repeal, finalized in April 2025, was achieved through bipartisan support and is expected to foster innovation and protect user privacy within the DeFi sector.
Background of the DeFi Broker Rule
The DeFi Broker Rule was introduced by the Department of the Treasury and the Internal Revenue Service (IRS) in December 2024. It aimed to extend existing tax reporting obligations to DeFi platforms, requiring them to collect and report sensitive taxpayer information for transactions involving digital assets. This move was part of a broader effort to enhance tax compliance and transparency in the rapidly evolving digital asset landscape.
However, the rule faced immediate criticism from industry stakeholders. Critics argued that it was ill-suited for the decentralized nature of DeFi platforms, which often lack the centralized control and infrastructure of traditional financial institutions. They contended that the rule would impose undue burdens on DeFi operators and could stifle innovation in the sector.
Investor Identification, Introduction, and negotiation.
Congressional Response and Repeal
In response to these concerns, members of Congress initiated efforts to overturn the DeFi Broker Rule. Utilizing the Congressional Review Act (CRA), which allows Congress to disapprove of and nullify federal regulations, lawmakers introduced House Joint Resolution 25 (H.J. Res. 25). This resolution sought to repeal the IRS’s DeFi Broker Rule and prevent the agency from issuing similar regulations in the future.
The resolution garnered significant bipartisan support, reflecting a shared commitment to preserving the integrity and growth of the DeFi industry. On March 12, 2025, the House of Representatives passed the resolution with an overwhelming majority. The Senate followed suit, passing the resolution on March 26, 2025. President Donald Trump signed the measure into law on April 10, 2025, effectively nullifying the DeFi Broker Rule.
Implications for the DeFi Industry
The repeal of the DeFi Broker Rule is seen as a significant victory for the DeFi industry. By removing the reporting requirements, Congress has alleviated a major regulatory burden that many believed could have hindered the growth and development of decentralized finance platforms. Industry leaders have expressed optimism that this move will encourage further innovation and investment in the sector.
For instance, a prominent DeFi platform operator noted, ‘This repeal is a breath of fresh air. It allows us to focus on what we do best—innovating and providing value to our users—without the looming threat of onerous regulations.’
Ongoing Tax Obligations for DeFi Participants
Despite the repeal of the reporting requirements for DeFi platforms, participants in the DeFi ecosystem are still obligated to comply with existing tax laws. They are required to track and report their own income, gains, and losses from digital asset transactions. The IRS retains the authority to audit individuals with unreported income and gains, leveraging the public nature of blockchain transactions to identify discrepancies.
Tax professionals advise DeFi participants to maintain meticulous records of their transactions to ensure compliance with tax obligations. As one tax advisor stated, ‘While the repeal removes reporting burdens from DeFi platforms, it doesn’t absolve individuals from their tax responsibilities. Proper record-keeping is essential.’
Conclusion
The repeal of the DeFi Broker Rule marks a pivotal moment in the regulatory landscape for digital assets. It underscores the importance of crafting regulations that are tailored to the unique characteristics of decentralized finance platforms. As the DeFi industry continues to evolve, ongoing dialogue between industry stakeholders and regulators will be crucial in shaping a regulatory environment that balances innovation with consumer protection.
References
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Ways and Means Committee. (2025, February 27). Ways and Means Repeals Biden Administration’s Midnight Crypto Rule, Provides Bipartisan Tax Filing Relief for Disaster Victims. Retrieved from (waysandmeans.house.gov)
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Ways and Means Committee. (2025, March 12). House Passes Ways & Means Legislation to Rollback Biden Administration’s Midnight Crypto Rule in Bipartisan Vote. Retrieved from (waysandmeans.house.gov)
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Cooley LLP. (2025, April 21). Congress Repeals Digital Asset Regulations Applicable to Decentralized Finance Platforms. Retrieved from (cooley.com)
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RSM US. (2025). Congress nullifies IRS crypto broker reporting regulations for DeFi platforms. Retrieved from (rsmus.com)
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DLx Law. (2025). Congress nullifies IRS crypto broker reporting rule for decentralized operators. Retrieved from (dlxlaw.com)
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