The IRS announced Thursday it formally removed a controversial rule from the federal tax code that would have obligated decentralized finance platforms to collect and report the same financial information as traditional brokers. The so-called DeFi broker rule was adopted in the last weeks of former President Joe Biden’s administration, though it never went into effect. It was shortly thereafter repealed via a resolution supported by bipartisan majorities in both chambers of Congress. In April, President Donald Trump signed the resolution, becoming the first U.S. president to turn a crypto-related bill into law.
Now, the Treasury Department and IRS have acted on that resolution, formally eliminating the rule from America’s tax code. According to a Treasury Department memo released Thursday, the bureaucratic action eliminating the DeFi broker rule was made on June 17, and is only now being publicly announced and implemented. When the proposed rule was first announced by the Biden administration’s Treasury Department in 2023, crypto industry leaders immediately voiced their vocal opposition to the measure, arguing it could destroy DeFi in the United States.
Because DeFi protocols run on automated code, often without the aid of human intermediaries, they could not comply with stringent reporting requirements designed for traditional brokers and brokerages like Charles Schwab, industry advocates maintained.Further, one of DeFi’s most alluring selling points is the anonymity it can offer users. The broker rule would have, if implemented, required DeFi platforms to collect identifying information from all customers, just like traditional brokerages.
Crypto advocates argued, given the public nature of on-chain transactions, that this development would have threatened customer privacy by exposing doxxed transaction histories to all internet users. The IRS’ rule on brokers will now revert to its previous definition, according to Thursday’s memo—one that does not implicate DeFi protocols and platforms.
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