In a notable development for the decentralized finance (DeFi) sector, the Trump administration has officially supported a legislative initiative aimed at repealing a controversial IRS rule. This rule broadens the definition of “broker” to include most DeFi projects, which many in the crypto community believe could significantly impede the growth of DeFi.
Administration’s Support for Legislative Initiative
The administration’s crypto policy chief announced strong backing for a joint congressional resolution intended to rescind this rule. Many advocates argue that the IRS rule, which has not yet been implemented, could stifle innovation within the DeFi space by imposing strict reporting requirements.
Concerns have been raised regarding privacy, as the rule could lead to the sharing of taxpayers’ personal information. This threatens the existence of permissionless protocols that define the DeFi landscape, which rely on user anonymity and privacy.
Progress in Congress
The resolution to repeal the IRS rule has gained momentum in the U.S. House of Representatives. Recently, the Ways and Means Committee voted to advance the measure for a broader vote on the House floor, indicating a growing support for the initiative.
With pro-crypto Republicans holding a narrow majority, the resolution’s passage seems increasingly probable. This legislation seeks to eliminate the IRS’s tax regime for DeFi projects approved in December, which many consider unfair and nearly impossible for DeFi protocols to comply with.
Criticism of the IRS Rule
Critics argue that the rule would require American DeFi users to link their on-chain addresses to their real identities. This requirement contradicts the core principles of privacy and anonymity in decentralized finance.
Additionally, it would compel permissionless DeFi protocols—automated systems governed by smart contracts without human oversight—to register similarly to traditional brokerage firms. Such changes could significantly alter the operational landscape of the DeFi sector.
Industry Reactions and Future Implications
The administration’s support has been welcomed by various crypto policy leaders and advocacy groups. They view it as a crucial step toward reversing a policy that could negatively impact small blockchain projects and the broader industry.
The upcoming vote on the resolution is seen as a critical moment for the crypto community. It could indicate a shift in political attitudes toward digital assets, potentially fostering a more favorable environment for DeFi projects.
Legislative Process and Potential Outcomes
If the resolution successfully passes through both chambers of Congress, it will require the president’s signature to become law. Senior advisors have indicated that they would recommend signing the resolution, further reinforcing the administration’s commitment to supporting the crypto industry.
This legislative effort showcases the administration’s stance on DeFi and emphasizes the growing recognition of the need to foster innovation within the financial technology sector. As the legislative process progresses, industry stakeholders are closely observing developments.
Conclusion
The potential repeal of the IRS rule could create a more favorable environment for DeFi projects. This would allow them to flourish without the burdensome compliance requirements that have been proposed.
In summary, the administration’s backing of the resolution to repeal the IRS’s controversial crypto tax rule represents a significant moment for the DeFi sector. With legislative momentum building and industry advocates rallying in support, the implications for the future of decentralized finance in the United States could be far-reaching.
📎 Source reference: decrypt.co
