As the IRS attempts to tighten its grip on cryptocurrency users, Congress is fighting back with renewed vigor. The House Ways and Means Committee just dealt a significant blow to the tax agency‘s DeFi broker rule, voting 26-16 to advance a resolution that would kill it entirely. No surprise there. The rule was about as popular in crypto circles as a computer virus.
Rep. Mike Carey, the Ohio Republican who introduced the resolution, has found himself an unlikely hero to crypto enthusiasts. This aligns with legislative priorities from Senators Cruz and Lummis who have been vocal advocates for cryptocurrency tax reform. His Congressional Review Act measure now heads to the full House, where it’ll likely sail through like a hot knife through butter. Committee chairman Jason Smith didn’t mince words, calling the IRS rule “unfair and unworkable.” Tell us how you really feel, Jason.
The rule, finalized last December, would force DeFi “custodial brokers” to collect user data for the IRS. Just one problem – many DeFi protocols don’t have centralized operators who could do such reporting. Oops.
The crypto industry wasn’t about to take this lying down. A whopping 75 companies signed a Blockchain Association letter opposing the rule. Their argument? The IRS fundamentally misunderstands how DeFi works. Shocking. Critics have been vocal that the regulation creates an unworkable burden for the entire industry.
There’s real money at stake here. Killing the rule would cost the government an estimated $3.9 billion over a decade. But industry players insist the cost of keeping it would be far worse – driving innovation offshore and burdening American entrepreneurs. This could severely impact the numerous financial services that operate via smart contracts, which automatically execute transactions without intermediaries.
The political winds are shifting in crypto’s favor. With Republicans now controlling both chambers of Congress and the Trump administration signaling pro-crypto attitudes, the IRS faces an uphill battle.
If the resolution passes both chambers and gets a presidential signature, it’ll be game over for the controversial rule that was set to take effect in 2027. For now, the 25% of Americans who own cryptocurrency can breathe a little easier. The taxman’s reach just got a bit shorter.
