Senate Votes to Repeal IRS DeFi Broker Rule—A Win for Crypto

The U.S. Senate has voted to repeal the IRS DeFi broker rule, marking a major victory for the crypto industry and decentralized finance (DeFi) innovation.

On March 4, the Senate passed a resolution overturning an IRS DeFi broker rule that would have imposed strict reporting requirements on DeFi protocols and decentralized exchanges (DEXs). The repeal was approved by a decisive 70-27 majority, demonstrating strong bipartisan support for a regulatory framework that fosters crypto development while addressing tax compliance concerns.

Details of the IRS DeFi Broker Rule 

Initially introduced under the Biden administration, the IRS DeFi broker rule sought to expand existing tax reporting obligations to DeFi platforms. It required decentralized exchanges and brokers to disclose gross proceeds from cryptocurrency sales, including taxpayer information. Critics argued that this rule was impractical due to the decentralized nature of these platforms and would stifle innovation by imposing excessive compliance burdens.

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Before the resolution can take effect, it must be passed by the House of Representatives. President Donald Trump has previously expressed pro-crypto sentiments, making it likely he will support the repeal. David Sacks, Trump’s AI and crypto policy advisor, has reaffirmed the administration’s stance against excessive crypto regulations, strengthening expectations that the resolution will be signed into law.

Support from the Crypto Community 

The crypto industry has largely welcomed the Senate’s decision. Eli Cohen, general counsel for the RWA tokenization platform Centrifuge, called the IRS DeFi broker rule “unworkable in practice” and emphasized that its repeal ensures taxpayers remain responsible for reporting their own transactions without imposing undue burdens on intermediaries.

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Kristin Smith, CEO of the Blockchain Association, celebrated the Senate vote, describing it as a significant milestone for DeFi and the broader U.S. crypto sector. In a post on X, Smith stated that the action helps ensure that DeFi, an American strategic strength, will continue to develop on “home soil.” She also highlighted that this decision aligns with broader efforts to maintain crypto innovation within the United States rather than pushing it offshore.

1/ It’s a big day for DeFi – and the US crypto industry. A bipartisan group of senators (including 18 Democrats) just voted to repeal the DeFi broker rule which would have crippled DeFi in the US.

Thank you @SenTedCruz for your leadership to help kill this rule for good.

— Kristin Smith (@KMSmithDC) March 4, 2025

This marks the first time Congress has taken direct action in support of cryptocurrency, setting a precedent for future regulatory measures. Smith noted that the Senate’s move bodes well for upcoming legislation concerning stablecoins and market structure regulations.

While the repeal removes reporting obligations from DeFi platforms, individual taxpayers remain responsible for accurately reporting their cryptocurrency transactions to the IRS. However, without an intermediary burdened by excessive compliance, DeFi platforms can continue operating with fewer regulatory hurdles. This decision may also open the door to further discussions on balanced crypto regulations that encourage both innovation and compliance.

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The Senate’s decision to overturn the IRS DeFi broker rule represents a pivotal moment in U.S. crypto policy. Beyond lifting restrictive reporting requirements, it signals a shift toward a more crypto-friendly regulatory approach. As the resolution advances to the House and potentially to Trump’s desk, its long-term impact on the industry remains to be seen—but it is likely to shape the future of crypto regulation in the United States for years to come.