Congress Bins IRS DeFi Tax Rule
In a rare bipartisan cooperation, the US Congress has dealt a decisive blow by voting to dump the IRS rule that would have forced decentralised finance platforms to submit user transaction data.
The US House just passed a resolution (292-132) to repeal an Internal Revenue Service (IRS) rule requiring DeFi platforms to file 1099-DA tax forms for users, following the Senate's earlier approval (70-27). The resolution now heads to US President Donald Trump's desk, where advisors are nudging him toward a signature.
"You can't squeeze centralised compliance from decentralised systems, the IRS demanded data that DeFi platforms physically cannot collect," said Rep. Jason Smith, who spearheaded the repeal.
What Was the Rule?
The rule, slated to begin in tax year 2025, mandated decentralised finance platforms to report user transactions via 1099-DA forms — the same way centralised exchanges like Coinbase do.
Why’s that a problem? Centralised exchanges have customer service departments, KYC procedures, and actual humans making decisions. DeFi protocols are essentially just code running on blockchains—autonomous systems with no central authority.
Think of the serving paperwork to a calculator - that's essentially what the IRS expected from the DeFi platforms.
The Numbers Story
The support for repeal speaks volumes:
House vote: 292-132 (with 76 Democrats crossing party lines)
Senate vote: 70-27
Presidential advisors (including Crypto Czar David Sacks): Unanimously recommend signing
This is the second major crypto regulatory rollback, following a similar Congressional overturn of the SEC's SAB 121 guidance, which had restricted crypto custody arrangements for banks.
Kristin Smith, CEO of the Blockchain Association, has already called it a “big day for DeFi,” emphasising that bipartisan backing helped prevent a rule that “would have crippled DeFi in the US.”
What Happens Next?
The crypto world breathes a collective sigh of relief as Trump prepares to sign the resolution. Yet questions remain about how, or whether, authorities will eventually bring DeFi into the tax fold.
For users, this means one less reporting headache.
The strong bipartisan support suggests a maturing understanding of blockchain technology among lawmakers. Whether this translates to comprehensive, sensible legislation remains to be seen.