Table of Contents
House Overturns IRS Rule on DeFi Tax Reporting in Bipartisan Vote
A bipartisan and strong decision that was a major bipartisan vote U.S. House of Representatives passed a resolution 292-132 Tuesday night to overturn the IRS law that been a requirement for financial decentralization (DeFi) systems to gather and provide taxpayer-related information. This decision is an important rejection of the crypto-related regulations that were finalized at the end of Biden’s administration. Biden administration.
A total of 76 Democrats and Republicans protested against the law that critics claimed could not be technically feasible and was too heavy for DeFi protocols.
“This rule is unfair and unworkable,” stated House Ways and Means Committee Chairman Jason Smith (R-MO). “There are real questions as to whether it could ever even be administered.” He also pointed out that the DeFi platforms are not able to control the user’s assets, which means they are unable to collect necessary tax data.
Rep. Mike Carey (R-OH) initially presented the joint resolution on Jan. 21, 2025. The House decision follows similar votes by both parties in the Senate the week before and further bolsters opposing what had been criticised as a sweeping regulatory overreach.
The recently rescinded IRS regulation sought to broaden what is considered a “broker” to include DeFi platforms. This would require the filing of the tax form 1099-DA. Yet, a lot of DeFi-related protocols do not have the technology to gather user information, making compliance almost impossible.
A Shift in Crypto Regulation?
The CEO of the Blockchain Association, Kristin Smith, praised the outcome, describing it as “an encouraging sign of a new era for crypto in Washington.” The vote reflects the increasing awareness of the blockchain’s distinct structure, as well as the challenges of applying financial regulation from the past to centralized technology.
The opposition to this resolution remains significant among some Democrats concerned about tax compliance as well as possible revenue losses. “This is special interest legislation that could be exploited by wealthy tax cheats, drug traffickers, and terrorist financiers,” Rep. Lloyd Doggett (D-TX).
Next Steps
The resolution was enacted under the Congressional Review Act, allowing Congress to rescind newly approved federal rules. If it is enacted, the resolution would stop the IRS from releasing similar tax laws based on DeFi later on without consent from Congress.
The resolution is now sent to the Senate for a second vote because of budgetary restrictions before it is sent to the desk of President Trump and is likely to be signed by the president.
