- President Trump signed the first crypto-focused bill into law, officially ending the IRS rule targeting custodial brokers and DeFi platforms.
- The Biden-era regulation required crypto platforms to report user data and issue Form 1099s for non-employment income like royalties and winnings.
- Backed by bipartisan votes, the repeal was led by Ted Cruz and Mike Carey, aiming to protect developers and foster decentralized innovation.
US President Donald Trump has signed into law a measure to reverse a rule on taxing cryptocurrencies adopted late in the previous administration. The law passed with the backing of Republican leaders, repeals the reporting requirement on custodial brokers and will redirect IRS resources to its existing mandate.
Legislative History
The regulation had mandated custodial brokers to provide user transaction reports to the IRS and send out Form 1099s reporting non-employment income. Members in both the House and Senate endorsed repealing the mandate introduced in the closing days of the Biden presidency.
Sen. Ted Cruz and Rep. Mike Carey introduced a joint resolution. The House and Senate passed the provision ahead of its final vote linked to a budget provision. The legislative procedure witnessed bipartisan support despite the provision gaining more support from the Republican side.
Reports are that the completed IRS regulation directly applied to front-end service providers. It focused on platforms that directly engage with end users instead of the underlying decentralized protocols. The rule would have compelled participants in the decentralized finance industry to act like traditional securities brokers and would have imposed heavy reporting responsibilities on them.
Congressional and Administrative Actions
Rep. Mike Carey witnessed the signing and stated, “Repealing this misguided regulation by President Trump and Congress allows the IRS to refocus its efforts on the responsibilities and obligations it already has to American taxpayers rather than establishing a new set of bureaucratic barriers.” His comment reaffirms an effort to eliminate administrative encumbrances on the crypto industry.
Amanda Tuminelli, DeFi Education Fund Executive Director, said, “The DeFi Education Fund applauds all members who signed this resolution to emphasize the need to protect software developers and foster innovation in decentralized technologies.” Her statement highlights industry fears regarding undue regulation that would stifle innovation.
The cancellation has been embraced by officials and legislators as an effort to ensure an equitable regulatory balance. The move aims to avoid potentially negative economic implications on technological advancement and decentralization. Legislators underscored the need to provide an environment that promotes market integrity and technological advancement.
Industry and Regulatory Reactions
Bo Hines, President’s Working Group on Digital Assets Executive Director, stated, “Repealing the IRS’s harmful DeFi broker rule means that developers and decentralized platforms will not be burdened with unimplementable reporting requirements that undermine privacy and drive innovation abroad.” His statement indicates an inclination towards regulation that promotes technological advancement in digital assets.
The crypto community is seeing the repeal as something to be welcomed by the industry. Developers and decentralized platforms now know better how to proceed with compliance without undue burdens. Regulators are set to focus on current tax obligations and make their enforcement processes more streamlined.
Government policymakers and industry executives are still on the same page with regards to supporting secure and efficient digital asset markets. The decision is significant in its move to alter regulatory direction by being explicit that the United States is receptive to alternative methods in managing digital assets. The open legislative process and express statements by the government provide precedent for action in the quick-changing crypto world that will come in the future.
