- The House panel voted 26-16 to repeal the DeFi broker tax rule, moving it forward.
- Critics say DeFi platforms lack user data, making the IRS rule unfair and impractical.
- Supporters state that the rule prevents activities like tax fraud and money laundering.
The U.S. House Ways and Means Committee, an arm of the U.S. House of Representatives, has supported the resolution to repeal the ‘DeFi broker rule’, stating that it is unfair and impractical. Notably, the rule requires users to report their digital asset transactions to the Internal Revenue Service (IRS). The rule was earlier approved in 2024 under the Joe Biden administration.
Posting an official announcement on X, the Ways and Means Committee passed the resolution in a 26-16 vote. The resolution has now passed to the House floor, following which it would be sent to the Senate and if it passes there, it would be directed to President Donald Trump, who can either oppose it or bring it to action. If approved, the resolution would be initiated in the year 2027, following which it would expand the tax rules to include decentralized exchanges, forcing them to disclose earnings from crypto sales and share taxpayer information.
However, the decision was met with criticism as many stated that the DeFi platforms do not collect personal information from users, unlike banks. Further, it added that the platforms run on smart contracts, allowing them to handle transactions without intermediaries. Since DeFi platforms do not track users’ information, critics emphasized that it is unnecessary to follow the IRS rule.
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Further, those who repelled the rule stated that if the rule came to pass, it would affect not only blockchain projects but also be a hurdle to innovation. Also, industry leaders and advocacy groups had warned against applying traditional tax rules to DeFi, as it creates uncertainty and limits growth. In a statement, Miller Whitehouse-Levine, the CEO of the DeFi advocacy group, stated that the rule needs to be overturned to protect Americans’ freedom in their transactions. He also said,
We urge all members —and all who want to establish the United States as a hub for financial innovation—to act swiftly to uphold Congress’s original intent by supporting the motion to overturn this misguided rule
Meanwhile, the supporters of the resolution strongly believed that the rule would not only prevent tax evasion in the industry but also enhance the IRS’s function in improving tax compliance. This will further prevent activities like money laundering and tax fraud. With ongoing political debates about cryptocurrency regulation, the outcome remains uncertain. However, strong opposition from the crypto industry and lawmakers worried about overregulation suggests this issue is far from settled.
