US Senate votes to overturn IRS DeFi broker rule

The U.S. Senate has voted 70-27 to overturn an Internal Revenue Service rule that would have imposed new reporting requirements on decentralized finance brokers. 

As reported by Business Insider, the motion presented by Senator Ted Cruz, was approved under the Congressional Review Act on Mar. 4, indicating that both parties were against the Biden-era rule. Introduced in December, the IRS DeFi broker rule required DeFi platforms to report user data for tax compliance, thereby broadening the definition of “brokers” to include them.

Since decentralized platforms do not hold funds or keep customer data in the same manner as traditional financial institutions, critics claimed the law was impractical. The digital asset think tank Coin Center referred to the proposal as “technologically unfeasible.”

“The Biden administration did everything it could to stifle financial innovation in the United States,” Senate Majority Leader John Thune (R-S.D.) said in a statement. “The Senate is working to undo these burdensome regulations one at a time to restore financial freedom for the American people.”

The resolution must still pass the House of Representatives in order to be delivered to President Donald Trump for final approval, even after the Senate has approved it. In addition to being prohibited from enforcing the rule, the IRS would also be prohibited from enacting similar policies in the future if the rule were to become law.

Supporting the repeal, the Blockchain Association, which represents popular cryptocurrency companies like Coinbase, Kraken, and Uniswap Labs, said it will avoid needless limitations on DeFi innovation. According to the DeFi Education Fund, the Senate vote was the “first of many historic milestones in the regulation of digital assets in the United States.”

This vote echoes previous attempts to remove Securities and Exchange Commission accounting standards for digital assets and continues a trend of bipartisan crypto-related legislation.

The Senate’s ruling might lay the stage for more extensive regulatory reforms, since stablecoin and cryptocurrency market structure legislation is anticipated to be on the legislative agenda.

A matching resolution has already been approved by the House Financial Services Committee, and a final floor vote is still pending. According to the White House, President Trump is expected to sign the bill into law as soon as possible.