**U.S. Senate Takes a Big Step for DeFi by Repealing IRS Reporting Rule**
In a significant move for the decentralized finance (DeFi) sector, the U.S. Senate voted 70–27 to repeal an IRS rule that required DeFi platforms to report user transactions, sending the resolution to the House of Representatives. The White House expressed its support for the repeal, labeling the rule a “midnight regulation” that placed unnecessary burdens on DeFi firms. David Sacks, an advisor to former President Trump, referred to it as a “last-minute assault” on the crypto community.
The Senate’s approval of S.J.Res.3 effectively nullifies an IRS regulation that imposed broker reporting requirements on DeFi protocols and digital asset custodians. The White House is enthusiastic about the Congressional Review Act (CRA) introduced by Senator Ted Cruz and Representative Mike Carey, aimed at rescinding the so-called Broker DeFi Rule, which they view as an unwarranted attack on the crypto industry.
The rule, which was enacted in December 2024, mandated that platforms involved in crypto transactions collect and submit user data to the IRS. With the resolution now moving to the House, President Trump is expected to sign it into law if it passes. The White House officially backed the repeal on March 4, characterizing the rule as a rushed measure from the previous administration that would impose impractical compliance requirements on DeFi developers.
The IRS defended the rule as a necessary measure to close tax gaps in the crypto market, claiming it would improve transparency for taxable events. However, critics, including the Blockchain Association and major firms like Coinbase and Uniswap, argued that the rule incorrectly applied traditional broker definitions to non-custodial platforms and automated market makers (AMMs). More than 75 crypto organizations formed a coalition to highlight the technical challenges the rule posed for decentralized protocols.
Under the Congressional Review Act (CRA), if Congress successfully repeals the rule, the IRS would be prohibited from issuing a similar regulation without new statutory authority. The House is expected to pass S.J.Res.3, given the bipartisan support it has garnered, with a vote anticipated before April 2025.
In response to the Senate’s decision, Kristin Smith of the Blockchain Association hailed the vote as a “decisive win for DeFi,” emphasizing the bipartisan agreement against regulatory overreach. The IRS estimated that revoking the rule could lead to a $3.9 billion revenue loss over the next decade.
“It’s a big day for DeFi – and the U.S. crypto industry. A bipartisan group of senators, including 18 Democrats, just voted to repeal the DeFi broker rule that could have severely impacted DeFi in the U.S. Thank you, @SenTedCruz, for your leadership in helping to eliminate this rule for good,” Smith tweeted.
Supporters of the repeal argue that the regulation’s broad scope was impractical for enforcement, while opponents caution that it could lead to diminished tax enforcement capabilities. President Trump is poised to champion this cause as it moves forward.
