The US House of Representatives has resoundingly voted to repeal the contentious DeFi broker rule established by the Internal Revenue Service (IRS) during President Joe Biden’s term.
The legislation passed with substantial bipartisan backing, with 292 members voting in favor and 132 against. While many Democrats opposed the repeal, 76 members broke party lines to collaborate with Republicans in scrapping the rule.
In December of last year, the IRS finalized the broker rule, broadening tax reporting obligations to encompass digital asset operators. This regulation categorized brokers—including DeFi front-end operators—as accountable for enforcing Know Your Customer (KYC) protocols, monitoring user activities, reporting transactions, and ensuring compliance with the law.
Opponents contended that imposing these requirements on DeFi platforms was impractical since, unlike centralized exchanges, DeFi platforms do not manage user funds or have access to personal information, rendering compliance infeasible.
Chairman of the House Ways and Means Committee, Jason Smith, criticized the rule, labeling it as unjust and hard to implement. He underscored that DeFi platforms do not operate like traditional financial institutions and are unable to gather the user information necessary for compliance.
He went on to say:
“These new IRS crypto regulations would require millions of taxpayers to file new Form 1099s in a manner that could overwhelm the agency and offer little benefit to effective and efficient tax administration.”
The House’s decision comes on the heels of the Senate’s vote on March 4 to overturn the contentious provision.
With both chambers now in agreement, the resolution will return to the Senate for final approval before being sent to President Donald Trump. Significantly, the White House has already expressed support for this initiative.
Reactions from the Crypto Community
Prominent figures in the crypto community have embraced the decision, celebrating it as an important victory.
Jake Chervinsky, Chief Legal Officer at Variant Fund, emphasized the significance of bipartisan support, noting that 94 Democratic lawmakers endorsed the repeal. Chervinsky indicated that this reflects a setback for the anti-crypto agenda.
Faryar Shirzad, Chief Policy Officer at Coinbase, characterized this vote as the most notable bipartisan effort related to crypto to date, adding that it enhances the momentum for Congress to move forward with stablecoin and market structure legislation.
He remarked:
“The IRS’ impractical DeFi broker rule would have set a troubling precedent for Americans’ privacy.”
Additionally, Miller Whitehouse-Levine, CEO of the DeFi Education Fund, also lauded the vote, stressing that a bipartisan supermajority of 292 House members acknowledged the shortcomings of the IRS and Treasury’s broker rule. He stated that this move signifies a positive advancement towards nurturing innovation in the US.
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