Treasury Scraps DeFi Broker Rules Following Legislative Repeal

Highlights:

• The Treasury removed the DeFi broker rule after Congress voted to repeal it under the Congressional Review Act.
• DeFi platforms no longer need to report user transactions, but users must still report gains and losses to the IRS.
• The repeal blocks the IRS from issuing a similar rule again unless Congress passes a new law approving it.

The U.S. Treasury Department officially removed the DeFi broker reporting rule following a successful vote by Congress and a final approval signed into law in April. The rule would have required certain platforms to file IRS Form 1099-DA for user transactions. The rule was set to take effect on February 28 this year.

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💥 BREAKING: CRYPTO TAXES

The US Treasury has removed crypto broker reporting rules — including Form 1099‑DA

It was designed to require crypto brokers, including DeFi platforms, to report users’ digital asset transactions to the IRS for tax compliance

Let’s gooo! 🔥 pic.twitter.com/dpGOASbW3Y

— Real World Asset Watchlist (@RWAwatchlist_) July 10, 2025

However, under Public Law 119-5 and the Congressional Review Act, the rule no longer has any legal standing. The Treasury has now removed it from the Code of Federal Regulations and restored the earlier text. These earlier provisions excluded entities that only validate blockchain transactions or sell tools used to control private keys. Lawmakers and industry groups strongly opposed the rule, stating that it misunderstood the structure of decentralized finance systems.

Advocates of decentralized platforms claimed that the regulation was unattainable to comply with. DeFi protocols do not retain customer funds or collect personally identifiable data. They are independent programs and do not act like banks or any classical financial organizations. This caused it to be a battle between technology and law, where the IRS would compel them to report separate transactions to the IRS. Individuals who use these platforms will still have to report their gains and losses to the IRS, but the DeFi protocols no longer have responsibilities in that regard.

IRS Blocked from Reintroducing Similar DeFi Broker Rules Without Congress

Congress used the Congressional Review Act not only to cancel the rule but also to stop the IRS from creating a similar policy in the future. A new version of the rule can only move forward if Congress approves it through new legislation. This restriction marks a major change in how the IRS can treat decentralized platforms.

Senator Cruz warned that the rule would harm U.S. innovation and drive developers overseas. Representative French Hill, who chairs the House Financial Services Committee, said the policy would have forced software developers to meet the same requirements as financial institutions. Industry groups such as the Blockchain Association and the Texas Blockchain Council also launched legal actions. These groups claimed the rule created unfair burdens and failed to consider how decentralized tools operate without central control.

Although the Joint Committee on Taxation estimated a $4 billion loss over ten years, lawmakers who supported the repeal emphasized other priorities. They emphasized the privacy issues and technical limitations that rendered the rule ineffective. The lawmakers all agreed that no reasonable taxes can be collected at the expense of creativity and individual privacy. They also noted that the majority of DeFi systems cannot access or control user accounts.

Wider Signals Show Shift Toward Crypto-Friendly Policy

The Treasury has also made additional changes that reduce reporting demands on banks and brokers. These institutions no longer need to report customer crypto holdings if they can prove that they manage digital asset risks effectively. At the same time, the SEC issued guidance to clarify that some crypto transactions do not count as liabilities on financial reports.

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