The Congress of the United States recently voted to withdraw the controversial decentralized finance (Defi) broker rule of the Internal Revenue Service (IRS), a big win for crypto. And on Thursday, President Trump killed the measure forever.
But let’s not fool ourselves – there are more pain.
In December 2024, the IRS proposed a broad rule that forced Defi platforms to follow standard Crypto Broker tax rules, including extensive users KYC and other disclosures. The crypto industry immediately pushed back, with countless blockchain groups that the IRS charges almost as quickly as the rule was announced.
Defi platforms are not designed to collect this type of information in the first place, and then the proposed rule is contradicted to Defi’s core objective to protect privacy, while transactions are kept transparent.
Fortunately, this rule will probably be completely deleted under the Donald Trump government after the 70-28 votes of the US Senate against the ruling on March 26. This follows the vote of 292-132 of the American house on March 11 and the earlier 70-27 vote of the Senate on March 4, both for the IRS Defi broker.
If the rule had lingered, this would have damaged the American crypto industry and innovation than just Defi. Such as the operator of the Crypto -tax platform Koinly, I know that compliance would have made considerably more expensive and complicated for us.
But it’s not over yet.
This withdrawal was easy because the rule was so exaggerated that even most government officials thought it was unworkable. But what happens if the IRS returns with a more subtle, carefully manufactured rule that is again focused on Defi? The overthrow of this version does not prevent the agency trying again.
It would not surprise me if the IRS now goes on an recruitment spree for Defi experts to help with this, especially after bringing in various crypto specialists in the office in February 2024.
IRS pretends there is still a fortune in non -collected crypto stresses
The IRS clearly believes that the crypto tax revenues are missing out and urging to expand its reach as much as possible. Defi may be on privacy, but it is still going with money, so it will not be ignored quickly.
The IRS does not take this rule slightly rejected. It would not be a piece to assume that the agency will solve its audits even more about our crypto users to ensure that their archives are accurate.
So what should the American crypto industry do? It can’t afford to be reactive. Instead of waiting for the IRS to drop a hard crypto tax scheme, it has to push even more difficult for the clarity of the regulations on Defi to prevent the wrongly informed and switching rules appear again.
The best time to insist on fairer IRS tax rules is now
Although crypto interest organizations are already doing great work on this, the industry must be even more convincing in the insistence on rules that distinguish real brokers from self-executing smart contracts, ensuring fair tax treatment for Defi participants and offering clear reporting guidance without stimulating innovation.
With Trump in function and a more pro-Crypto-friendly environment in Washington, there is a chance to get rules just before the pendulum waves back to aggressive enforcement.
That means that there is a four -year window to get this in shape.
Although the crypto industry is proactive and deals with Trump, it must ensure that these rules are fully adopted, clarified and put in the law. Otherwise it could have to do with an even heavier regime regime under a future administration that is less friendly to decentralized technologies.
The Defi broker rule of the IRS should serve as a warning: until there is a workable framework, regulators will continue to try to impose hard rules on a technology that they hardly understand.
And next time the crypto industry may not have so happy to get enough votes for a withdrawal.
