President Trump Overturns IRS Crypto Rule Affecting DeFi Transactions

The IRS Rollback: A Major Pro-Crypto Boost from Congress

What to know:

President Donald Trump has signed a law passed by Congress that rejects an IRS rule that had been adopted in the final days of the Biden administration and which would have made a significant difference in DeFi projects.

Congress killed the tax regulations with vote after vote, almost always with broad bipartisan majorities.

This is the first of such pro-crypto bills to pass the entire Congress.

Under a signature by President Donald Trump, the decentralized finance (DeFi) portion of the cryptocurrency community is now relieved of U.S. Internal Revenue Service (IRS) insistence that they be treated as brokers and required to monitor and report on user activity.

A particular, and narrow, IRS rule that was adopted in the final days of the previous administration of former President Joe Biden has been formally tossed, said Representative Mike Carey, an Ohio Republican who backed the action. The agency is prohibited from doing anything like it, as lawmakers invoked the congressional review act to repeal the tax regulation.

“The DeFi Broker Rule created an obstacle to American innovation, intruded on the privacy of ordinary Americans, and would have overwhelmed the IRS with a tsunami of new filings it cannot absorb during tax season,” Carey said in a statement Thursday after the resolution was signed.

Even though the cause was relatively modest, the achievement is the first time a pro-crypto measure has ever cleared the U.S. Congress.

Both the Senate and House of Representatives voted to overturn the IRS action with nearly bipartisan votes, reflecting the power of the crypto industry in this Congress. That might be helpful for the industry’s odds on other broader matters such as the legislation to regulate stablecoin issuers and the creation of market rules for crypto trades.

“With President Trump’s signature, the rule is officially disapproved and set aside, and the United States is now the first country to have passed crypto legislation — a DeFi history book in the making,” the DeFi Education Fund said in a Thursday post on its website.

Now that the DeFi tax resolution is behind us, the next crypto issue in Congress has been stablecoin legislation. The same legislation has gone through relevant committees in each chamber of both houses and is waiting for floor votes in each. Approvals would trigger a process of linking the two efforts into one compromise.

The president has asked for a bill on his desk by August, and the lawmakers who are carrying the measure have said that such a deadline is still achievable.