Congress has successfully overturned the Biden administration's digital asset reporting rule, signaling a notable shift in Washington’s approach to cryptocurrency regulation. This judicial action exhibits what many in our movement know to be true: the growing clout of the cryptocurrency industry to influence public policy. Then, in December 2024, regulators completed the motions. These rules expanded the authority of “digital asset brokers” to include certain actors in the decentralized finance (DeFi) space.
Sen. Ted Cruz (R-TX) and Rep. Mike Carey (R-OH) are spearheading efforts to repeal the harmful rule. It might choke innovation and force crypto businesses to move overseas, the very thing they are trying to avoid. The short-lived regulation would have imposed burdensome, costly information reporting rules on all DeFi brokers. This new requirement would start to apply to digital asset sales occurring on or after 1/1/27.
The IRS’s now-rescinded proposed broker rule would have forced DeFi brokers to issue IRS Form 1099-DA. This stupid form was one they had to send to the IRS and to their customers. This form would have provided a comprehensive account of gross proceeds from digital asset exchanges. Such a bill would have to include the name and address of each customer. Critics complained that these requirements were needlessly burdensome and inappropriate for the complex and decentralized nature of DeFi.
In strong opposition to the regulation, opponents raised dire warnings. They argue that it would place unrealistically burdensome compliance obligations on DeFi actors, potentially crushing the innovation and job creation that the nascent industry will bring. Additionally, they claimed that the rule may push crypto companies to more hospitable regulatory environments. This is something lawmakers are realizing, and the pendulum is swinging toward a more balanced approach. This repeal demonstrates that commitment to striking a balance between fostering innovation and tackling important regulatory concerns.
