The US House of Representatives has taken a significant step in the world of cryptocurrency by voting to overturn the controversial DeFi broker rule put forth by the IRS. This rule, which was introduced under President Joe Biden’s administration, aimed to expand tax reporting requirements to include digital asset operators, including DeFi front-end operators.
The measure passed with a strong bipartisan support, with 292 lawmakers voting in favor and 132 opposing it. Despite some resistance from Democrats, 76 of them broke ranks to join Republicans in overturning the rule. This decision comes after the IRS finalized the broker rule last December, which classified brokers as responsible for enforcing KYC measures, tracking user activity, reporting transactions, and ensuring compliance.
Critics of the rule argued that applying these requirements to DeFi platforms was impractical. Unlike centralized exchanges, DeFi platforms do not have access to user funds or personal data, making it impossible to comply with the rule. House Ways and Means Committee Chairman Jason Smith condemned the rule, stating that DeFi platforms do not function like traditional financial institutions and cannot collect the necessary user information for compliance.
Following the House’s decision, the Senate also voted on March 4 to overturn the provision. With both chambers aligned, the resolution now heads back to the Senate for final approval before reaching President Donald Trump’s desk. The White House has already indicated support for the move.
Leaders in the crypto community have welcomed the decision, viewing it as a significant win. Jake Chervinsky, Chief Legal Officer at Variant Fund, highlighted the importance of bipartisan support and noted that 94 Democratic legislators backed the repeal. This is seen as a defeat for the anti-crypto agenda. Coinbase’s Chief Policy Officer, Faryar Shirzad, described it as the most significant bipartisan crypto vote to date and believes it will strengthen momentum for Congress to advance stablecoin and market structure legislation.
The CEO of DeFi Education Fund, Miller Whitehouse-Levine, also praised the vote, emphasizing that a bipartisan supermajority of 292 House members recognized the flaws in the IRS and Treasury’s broker rule. He sees this decision as a positive step towards fostering innovation in the US.
Overall, the overturning of the DeFi broker rule represents a significant development in the crypto world, signaling support for innovation and a recognition of the unique nature of DeFi platforms. This decision paves the way for further progress and collaboration in the cryptocurrency space.