US House Votes to Overturn IRS DeFi Broker Rule
The recent passage of H.J. Res 25 by the U.S. House of Representatives marks a significant shift in the regulatory landscape for decentralized finance (DeFi) in the United States. This bipartisan-supported resolution effectively nullifies the Internal Revenue Service’s (IRS) contentious broker rule, which sought to impose rigorous reporting requirements on DeFi platforms.
The vote saw 292 lawmakers, including all House Republicans (with a few exceptions), and 76 Democrats, affirming their stance against the IRS’s approach, which critics argued failed to recognize the intricacies of decentralized technology. The DeFi Education Fund commended the resolution’s passage, reiterating the importance of maintaining Americans’ freedom in their transaction methods.
The IRS’s proposed rule aimed to improve tax compliance by classifying DeFi applications and software providers as traditional brokers, thus subjecting them to strict reporting obligations. Supporters of the rule believed this would enhance tax revenue collection, while detractors highlighted that such regulatory measures would impose excessive compliance burdens on developers who do not actually control custodial assets.
Notably, the move to block this rule was supported by prominent players in the crypto industry, including venture capital firm Andreessen Horowitz, which joined in legal challenges against the IRS’s authority over DeFi rules. This combined effort underscores the increasing concern that overregulation could stifle innovation and drive talent and investment away from the U.S. market.
French Hill, chair of the House Financial Services Committee, characterized the broker rule as “a clear example of government overreach.” He emphasized the need for clearer regulatory frameworks that allow for the growth and development of American digital assets without unnecessary constraints.
As H.J. Res 25 moves back to the Senate—due to a necessary technicality regarding the origination of budget-affecting bills—its prospects seem favorable. The Senate had previously voted in favor of a similar resolution with a solid 70 to 27 vote. If it passes again and reaches the president’s desk, it could cement the rejection of the IRS’s broker rule, providing relief to the DeFi sector.
Despite the political developments, the broader crypto market has experienced a downturn, with a 0.7% decrease within the last 24 hours. However, key assets like Bitcoin (BTC), XRP, and Dogecoin (DOGE) have shown signs of recovery. Bitcoin’s price increased by 1.1%, while XRP and DOGE appreciated by 3.1% and 3.4%, respectively. This recovery comes amid a challenging week for the digital asset sector, which saw declines almost reaching 10% in value, with Bitcoin dropping to a four-month low under $77,000 and Ethereum (ETH) slipping below $1,800 for the first time in 16 months.
The outcome of the legislative efforts surrounding H.J. Res 25 could have far-reaching implications for the future of cryptocurrency regulations and the overall health of the digital asset market in the U.S.
