A controversial by the US Internal Revenue Service requires decentralized finance brokers to report the Crypto transaction, it can be overturned as MPs have pushed it to cancel it.
On 26 February, the representatives of the US House carried forward a proposal to scrap the rule with the House’s methods and means committee. Voting 26-16 In favor of cancellation. Sankalp now goes to the full house for one vote.
If it passes, the Senate will then decide its fate. A successful Senate vote will send measures to President Donald Trump, who can either sign it in the law or veto it. However, if it does not turn, the rule will be effective on January 1, 2027.
The “DEFI Broker Rules” proposed by IRS in August 2023, and officially finalized in January 2024, would require some DEFI operators-to include front-end service providers for decentralized exchanges-to collect and report user transactions from the Crypto sale.
According to IRS, it will level the “taxpayer playground” by implementing the same standards as traditional finance institutions.
However, industry leaders see it differently. Jason Smith, Chairman of Critics like Ways and Instrument Committee Discussion This rule is unacceptable to DEFI, where platforms often work without centralized control and do not collect user data by design.
Commenting on development, DEFI Education Fund CEO Miller Whitehouse-Lavin welcomed the decision to cancel the rule, arguing that the rule represents an “illegal and unconstitutional overrech” that reduces the financial privacy of Americans and prevents innovation in decentralized finance.
Advocates of Defi have previously expressed concern about the privacy implications. Some fear platforms such as Uniswap may require the user’s identity to collect, which refutes the fundamental ethos of decentralized finance.
Others, such as the Concepts Attorney Bill Hughes, see it as a final-end attempt by the previous administration, to get down on Crypto before leaving the office.
A day after IRS finalized the rule on 27 December, CEO of Blockchain Association Christin Smith called it “unconstitutional” and warned that this crypto innovation could push the offshore.
Texas Blockchain Council Chairman Lee Brecher echoed the concern that compliance for many people in a decentralized location is “practically impossible”.
The Blockchain Association, DEFI Education Fund, and Texas Blockchain Council have already filed a case against IRS, claiming that the rules will force the DEFI developers to follow the rules that they cannot only implement.
Despite the dispute, IRS is firm. In a joint statement with the Treasury, the agency rejected arguments that DEFIs should be exempted, saying, “Individuals with technology expertise who operate trades or businesses related to financial services should operate financial services businesses as any other person.”
