DeFi regulation ushers in a turning point? U.S. lawmakers want to abolish IRS's brokerage rules

Source: cryptoslate

Compiled by: Blockchain Knight

U.S. Congressmen are preparing a Congressional Review Act (CRA) to challenge the IRS’ broker rules that require DeFi participants to report user data to the IRS.

Fox Business Channel reporter Eleanor Terrett revealed on March 4 that Republican Senator Ted Cruz is leading the way to introduce the CRA. The preliminary voting was originally scheduled to take place on March 5, but the vote could be postponed due to a conflict in agenda including an upcoming State of the Union speech.

According to Terrett, "This CRA will abolish the broker rules of the IRS under the U.S. Treasury Department, if passed by a simple majority in both the Senate and the House of Representatives, which will abolish the broker rules of the US Treasury Department. The rule expands the definition of a ‘broker’ and includes DeFi developers. Supporters of the CRA said the current rules do not fit the unique nature of DeFi."

The IRS Broker Rules were finalized last year and new tax filing requirements were proposed for entities that handle digital assets.

This rule classifies brokers (including DeFi front-ends) as entities responsible for tracking user activity, reporting transactions, and executing compliance measures. The rule also requires the DeFi platform to implement the "Know Your Customer" (KYC) process.

In addition, the regulatory provision applies to all digital assets, including NFTs and stablecoins.

The White House supports the move, and David Sacks, head of asset affairs at Crypto, issued a public statement Tuesday saying "the so-called broker DeFi rules are the last-minute attacks on the Crypto community by the Biden administration."

Peter Van Valkenburgh, executive director of Crypto asset think tank Coin Center, criticized the rule for treating software developers and infrastructure providers as brokers.

He believes that implementing such measures would undermine privacy rights, ignore bipartisan concerns and hinder technological advancement.

In view of this, Valkenburgh stressed that the results of this vote will be an early indicator of how the U.S. government treats digital assets regulation in the coming years.

"People have been talking about the new Congress taking a more friendly stance on Crypto assets; this vote will be the decisive first test of this theory," he said.

Meanwhile, revoking the rule would align with the wider pro-Crypto asset stance of the Donald Trump administration and strengthen the growing influence of pro-Crypto asset lawmakers.