In a sweeping rebuke to federal overreach, the U.S. Senate voted 70-27 to strike down a controversial IRS rule that would have forced decentralized finance platforms to track user transactions. The March 4, 2025 vote crossed party lines, with 17 Democrats joining Republicans to deliver a clear message: hands off crypto.
The rule, finalized in January 2024, would have expanded the definition of “brokers” to include DeFi platforms. These platforms would’ve been required to report user transaction data to the IRS. Fat chance that was going to fly with the crypto community.
Expand the definition of “broker” to include DeFi? The IRS was dreaming big on that one.
Senator Ted Cruz spearheaded the effort using the Congressional Review Act, which allows Congress to overturn federal regulations with a simple majority. The crypto industry had been fighting the rule since its proposal in August 2023, arguing it was technologically impossible to implement. No kidding.
DeFi platforms don’t collect the user data the IRS wanted. That’s kind of the whole point of decentralized finance. Critics argued the rule would force software developers to do the impossible or shut down, effectively killing innovation in the American crypto sector.
The Blockchain Association called the rule unconstitutional. Multiple lawsuits followed. The message was clear: this wasn’t just unpopular, it was unworkable.
The resolution now heads to the House, where the Financial Services Committee has already given its blessing. Senate Majority Leader John Thune praised the vote as a step toward restoring financial freedom for Americans. The White House has signaled President Trump will sign it when it reaches his desk. Not surprising given his administration’s pro-crypto stance.
The vote signals a major shift in Washington’s approach to cryptocurrency regulation. Younger lawmakers from both parties seem to get it: over-regulating crypto just pushes innovation overseas.
For the crypto industry, this means breathing room. The rule would have taken effect in 2027, potentially costing $3.9 billion in tax revenue over a decade. But for DeFi enthusiasts, the price of compliance would have been much higher – their entire business model.
The regulatory pushback protects the core principle of DeFi as a peer-to-peer system that enables direct transactions without traditional banking intermediaries.
Sometimes Washington actually listens. Who knew?
