House Votes to Overturn IRS Regulation on DeFi Platforms

Highlights:

• The House voted to repeal an IRS rule that requires DeFi brokers to report crypto transactions to the government.
• Industry leaders have argued that the IRS rule harms innovation and is impossible for decentralized platforms to follow.
• The resolution moves to the Senate and could be signed or vetoed by President Trump if both chambers approve it.

The US House of Representatives is advancing a resolution repealing a tax rule for decentralized finance (DeFi) platforms. The House Ways and Means Committee voted 26 to 16 to advance the resolution. The final rule, approved by the Internal Revenue Service (IRS) in December, is set to increase the reporting requirements for digital assets. DeFi brokers would be required to provide transaction data of users to the IRS. For instance, they would have to provide data on gross proceeds from cryptocurrency sales. The regulation is to come into effect in 2027 unless it is repealed.

Those who support the resolution argue that the rule is unconstitutional and an overreach of government power. They worry it could hurt financial innovation in the United States. Others argue that the IRS has no authority to compel such a requirement. According to them, DeFi platforms do not have centralized control; hence, they do not collect data like traditional financial institutions.

Industry Leaders and Lawmakers Clash Over DeFi Regulations

The IRS claims the rule is required to establish a fair tax system on all financial transactions. The agency said the regulation makes sure that, like other taxpayers, cryptocurrency traders report their earnings.

According to industry leaders, the rule could force crypto businesses out of the United States. Lawsuits have been filed against the regulation by the Blockchain Association, the Defi Education Fund, and the Texas Blockchain Council. They claim that the rule forces DeFi developers to abide by rules they cannot implement. Many believe the rule contradicts the decentralized nature of blockchain technology.

Big win today! House Ways & Means advanced H.J.Res. 25, moving one step closer to overturning the harmful DeFi broker rule that threatens innovation in the U.S. Great to be on the Hill with @BlockchainAssn, pushing for policies that support the future of DeFi. @AptosLabs https://t.co/2rk1yHRjf9

— Jon Sabol (@_JonSabol) February 27, 2025

Some lawmakers agree with the industry’s concerns. The chairman of the House Ways and Means Committee stated that the rule could damage America’s leadership in digital assets. He believes the regulation would create excessive paperwork that the IRS cannot handle efficiently. The rule also benefits foreign crypto firms, which are not subject to the rule, while U.S.-based platforms suffer.

Defenders of the IRS rule claim that abolishing it would enable some users to evade taxes. They contend that cryptocurrency traders should not have an unfair advantage over citizens who use traditional services. They also claim that the rule ensures a level playing field for all taxpayers, and repealing the rule could cost the government billions in lost revenue.

Next Steps: Senate Vote and Presidential Decision

The measure moves to the full House for a vote and then proceeds to the Senate if it passes. President Donald Trump will get to decide, when both chambers approve it, if he is going to sign or veto it.

If the IRS rule is vetoed, DeFi platforms will have to report user transactions from 2027. The resolution, if enacted into law, would exempt DeFi brokers from having to follow the IRS reporting requirements.