U.S. House Votes to Overturn IRS Rule on DeFi Platforms
- House passes bipartisan resolution to repeal IRS rule on DeFi platforms.
- DeFi community supports repealing rule, fearing its negative impact on U.S. innovation and privacy.
- The IRS rule could lead to U.S. companies moving overseas to avoid compliance burdens.
Members of the House of Representatives voted with a clear majority to reverse IRS regulations that define crypto entities together with DeFi platforms as brokers.
The latest IRS rule required all crypto entities to gather tax information from their users before the Biden administration left office. The Congress gained a majority vote through the House that sided with the Senate in passing an act to revoke the rule through the Congressional Review Act. The DeFi community shows broad-based support because they want to stop the IRS rule from affecting DeFi operations.
A Step Toward Protecting U.S. Innovation and Privacy
The rule in question, which went into effect at the beginning of the year, requires DeFi platforms to act like traditional brokers and gather detailed information about their users’ trades. This includes collecting Form 1099 tax returns for activities that are typically not related to employment.
Rep. Mike Carey (R-Ohio) and Sen. Ted Cruz (R-Texas) led the charge in introducing a joint resolution to repeal the rule. Carey expressed his satisfaction with the House’s strong, bipartisan vote and emphasized the risks the rule posed to American innovation and privacy.
“The House just passed my bill to repeal the IRS DeFi Broker Rule in a strong, bipartisan fashion. Now we need to get it on @POTUS’s desk and signed into law,” Carey said on X.
The IRS’s requirement that DeFi platforms operate like traditional brokers raised concerns about the potential for companies to move operations overseas to avoid the compliance burdens.
According to Carey, the rule would push U.S. companies and tax revenue abroad. The Trump administration shared this opinion by claiming that implementing this rule would damage both economic conditions and privacy considerations. The administrative rule’s abolishment represents a beneficial measure that sustains America’s position in the DeFi marketplace’s continuously changing environment.
Industry Groups Challenge IRS Rule Amid DeFi Concerns
The Blockchain Association and other industry groups quickly filed a lawsuit against the IRS after the rule was finalized, arguing it would stifle DeFi innovation.
These groups have expressed concerns that the rule would create an unprecedented compliance burden for DeFi platforms, potentially driving businesses out of the U.S. In addition to the House vote, a key funding resolution was also approved, which now heads to the Senate.
“This rule, issued as a midnight regulation in the final days of the previous Administration, would stifle American innovation and raise privacy concerns over the sharing of taxpayers’ personal information, while imposing an unprecedented compliance burden on American DeFi companies,” according to the administration’s statement.
During the debate Senate Minority Leader Chuck Schumer along with other Democratic legislators voiced their opposition because they believed the resolution would reduce IRS enforcement capabilities. The Senate awaits voting on a U.S. government budget resolution which features the controversial vote about the rule.
When both the resolution passes through Congress and President Trump issues his signature it will create a lasting preventive measure against the IRS enforcing identical requirements. The status of the rule remains unknown because Congress continues its legislative process.
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