US lawmakers are currently working on a Congressional Review Act (CRA) to challenge the Internal Revenue Service’s (IRS) broker rules, which require participants in decentralized finance (DeFi) to report user data to the agency. Fox Business reporter Eleanor Terrett recently revealed on March 4 that Republican Senator Ted Cruz is spearheading efforts to introduce the CRA. The initial vote was scheduled for March 5, but due to scheduling conflicts, including the upcoming State of the Union address, there may be delays in the process.
The CRA, if passed with a simple majority in both chambers, would repeal the IRS broker rule issued by the US Treasury. This rule expands the definition of a ‘broker’ to include DeFi developers. Proponents of the CRA argue that the current rule is ill-suited to the unique characteristics of DeFi platforms.
The IRS broker rule, which was finalized last year, imposes new tax reporting requirements on entities involved in handling digital assets. It categorizes brokers, including DeFi front-ends, as responsible for monitoring user activity, reporting transactions, and enforcing compliance measures. The rule also mandates that DeFi platforms implement Know Your Customer (KYC) processes. Furthermore, the regulation encompasses all digital assets, including non-fungible tokens (NFTs) and stablecoins.
The White House has expressed support for this move, with Crypto Tzar David Sacks publicly denouncing the rule as an “11th hour attack on the crypto community by the Biden administration.” Peter Van Valkenburgh, the executive director of the crypto think tank Coin Center, criticized the rule for categorizing software developers and infrastructure providers as brokers. He argued that enforcing such measures undermines privacy rights, ignores bipartisan concerns, and hampers technological progress.
Valkenburgh emphasized that the outcome of the upcoming vote will serve as an early indication of the US government’s stance on digital asset regulation in the future. He stated, “There has been much talk of the new Congress taking a friendlier stance toward crypto; this vote will be a decisive first test of that theory.”
Repealing the rule would align with the broader pro-crypto stance of the previous Donald Trump administration and reinforce the growing influence of pro-crypto lawmakers. This vote will be crucial in shaping the trajectory of digital asset regulation in the United States in the years to come.