US Congress Moves to Repeal IRS Rule Targeting DeFi Platforms

• The US House of Representatives voted 292-132 to repeal the IRS rule requiring DeFi platforms to report user transactions, following Senate approval.
• Lawmakers argue the rule imposed an unreasonable compliance burden and threatened user privacy, potentially driving digital asset development outside the US.
• The repeal now moves forward, with strong White House support, signaling that the controversial IRS regulation is unlikely to be enacted.

A controversial IRS requirement for DeFi platform user transaction reporting received opposition from the US House of Representatives through their vote to strip the measure out of existence. The motion collected votes from both Republican and Democratic parties and earned a 292-132 victory. The repeal received support from 76 Democratic members who joined Republicans in backing the measure. 

Every voting opponent came from Democratic Party members. Once again the lawmakers voted to remove the regulation during both the Senate on March 4 and the House later on March 16 with similar majorities of 70-27 and 292-132.

DeFi Broker Rule Raises Concerns Over Privacy

The rule, introduced by the Internal Revenue Service, sought to classify DeFi platforms as brokers. It would have required decentralized exchanges and other platforms to collect and report transaction details, including gross proceeds from crypto sales and user information. Critics argue that the measure created an excessive compliance burden while threatening financial privacy. Many lawmakers viewed it as a broad government overreach that could disrupt innovation in the digital asset sector.

Lawmakers Warn of Regulatory Overreach

Federal law mandated by Republican Representative Mike Carey would provoke privacy concerns for the millions of American taxpayers. He outlined that decentralized financial systems operate beyond traditional financial institutions, thereby making rule implementation problematic. House Financial Services Committee Chairman French Hill warned that over-regulating cryptocurrency businesses would push them to establish operations abroad from the United States.

A consensus emerged between partisan representatives that regulatory rule 23.1 represented substantial threats to the DeFi sector, resulting in its widespread endorsement. The resolution continues its path toward getting signed off before the final decision. The White House stands in favor of overturning the rule, therefore the measure faces a strong possibility of official repeal in the near future.