U.S. lawmakers have taken the first step to repeal a new tax rule that affects cryptocurrency transactions. The rule, known as the “DeFi broker rule,” requires brokers to report digital asset transactions to the Internal Revenue Service (IRS). On Feb. 26, the House Ways and Means Committee voted 26 to 16 in favor of a resolution aimed at repealing the “DeFi broker rule.”
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U.S. lawmakers have taken the first step to repeal DeFi broker rule. Source: XThe resolution must still pass the full House of Representatives and the Senate before reaching President Donald Trump for approval.
IRS Rule Would Require Brokers to Report Crypto Transactions, Set to Take Effect in 2027
The IRS regulation, approved on December 5, 2023, expands existing tax reporting requirements to include decentralized exchanges (DeFi). Under the rule, brokers must report gross proceeds from cryptocurrency sales, along with details about taxpayers involved in these transactions.
The rule is scheduled to take effect in 2027. However, industry experts argue that it is both unworkable and unfair. Many DeFi platforms do not collect user information, making compliance nearly impossible.
Miller Whitehouse-Levine, CEO of the DeFi Education Fund, called the rule an “unlawful and unconstitutional overreach.” He urged lawmakers to overturn it, stating that it threatens Americans’ financial freedom and the United State’s position as a leader in financial innovation.
We urge all members—and all who want to establish the United States as a hub for financial innovation—to act swiftly to uphold Congress’s original intent by supporting the motion to overturn this misguided rule.
Whitehouse-Levine said.
Critics Call the Rule Unfair and Impossible to Enforce on Decentralized Platforms
The Ways and Means Committee Chairman, Jason Smith, strongly opposed the regulation, arguing that it was rushed through during former President Joe Biden’s last days in office.
Not only is it unfair, but it’s unworkable. DeFi brokers do not even collect the information from users needed to implement this rule.
Smith said.
Smith also pointed to warnings from former IRS Commissioner Charles Rettig, who said the rule would create an overwhelming amount of paperwork that the IRS would struggle to process efficiently.
Additionally, Smith claimed the IRS overstepped its authority when it extended reporting requirements to digital wallet providers. He argued that the rule benefits foreign crypto firms, which are not subject to the same requirements, while harming American investors.
Resolution Faces Key Votes in House and Senate Before Reaching President Trump
The resolution now moves to the full House of Representatives for a vote. If it passes, it will go to the Senate for consideration. If the Senate also approves, it will be sent to President Trump, who can either sign it into law or veto it.
The repeal effort comes as the U.S. government becomes more supportive of crypto. Hundreds of pro-crypto candidates won seats in Congress, and the Republican Party now controls both the Senate and House.
Since then, there have been several positive developments for crypto. The Securities and Exchange Commission (SEC) has dropped multiple cases against crypto firms throughout February. Many industry leaders believe these changes could make the U.S. government the most pro-crypto in history.
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