The Biden-era rule would have drastically expanded tax reporting requirements for digital asset transactions.
President Donald Trump on Thursday signed into law a resolution overturning a Biden-era rule from the IRS that expanded the definition of a broker to include decentralized cryptocurrency exchanges.
Rep. Mike Carey (R-Ohio) introduced the Congressional Review Act disapproval resolution that repealed the IRS Digital Assets Sale and Exchanges Rule, also known as the “DeFi Broker Rule.”
The lawmaker, who is a member of the House Ways and Means Committee, said in a statement that he was in attendance when Trump signed the act into law.
Carey thanked Trump for signing the act.
“The DeFi Broker Rule needlessly hindered American innovation, infringed on the privacy of everyday Americans, and was set to overwhelm the IRS with an overflow of new filings that it doesn’t have the infrastructure to handle during tax season,” Carey said.
“By repealing this misguided rule, President Trump and Congress have given the IRS an opportunity to return its focus to the duties and obligations it already owes to American taxpayers instead of creating a new series of bureaucratic hurdles.”
The IRS announced the DeFi Broker rule in December 2024.
The regulation drastically expanded tax reporting requirements for those involved in digital asset transactions by requiring decentralized finance (DeFi) brokers to report on the gross proceeds of the sale of their digital assets through Form 1099.
The rule subjected brokers to the same reporting rules as brokers for securities and operators of custodial digital asset trading platforms, despite there being key differences between the two.
Centralized exchanges such as Coinbase and Kraken act as the intermediary between buyers and sellers, while DeFi exchanges are not centralized and do not act as a third-party intermediary, instead allowing users to transact directly on a blockchain network, which powers cryptocurrencies.
Because of the difference in the way DeFi exchanges act, they do not collect the information needed to comply with the IRS rule.
In a statement announcing the rule, the IRS said it would reduce the number of “inadvertent errors or noncompliance” on taxpayers’ federal income tax returns and help ensure all taxpayers “play by the same set of rules.”
The rule did not change or impose any new tax obligations on digital assets, as taxpayers have always been obligated to include gains from sales or exchanges of digital assets in their income.
However, the regulation sparked concern among the crypto industry and lawmakers, who were concerned it would create more confusion for everyday Americans, infringe on their privacy, and burden the government with extra paperwork.
The Blockchain Association, a nonprofit representing a broad coalition of U.S. digital asset companies, wrote in a February letter to congressional lawmakers that the rule was “misguided” and “threatens to extinguish American leadership in DeFi and undermine our nation’s competitive edge in financial technology innovation.”
“The DeFi broker rule, finalized in the waning days of the Biden administration, represents regulatory overreach that fundamentally misunderstands the technology it attempts to regulate and ignores Congress’s intent,” it said in the letter.
Both the House and the Senate in March voted to nullify the revision through the Congressional Review Act, which allows Congress to overturn certain federal rules with a simple majority.
Trump on the campaign trail pledged to be a “crypto president” and vowed to promote the adoption of digital assets.
The Blockchain Association welcomed Trump’s action in a statement, saying “our industry’s innovators, builders, and developers can breathe again.”
“This rule promised an end to the United States crypto industry – it was a sledgehammer to the engine of American innovation,” said former CEO Kristin Smith. “On behalf of our members, and the entire industry, we’re grateful to have this harmful rule off the books for good.”
The Epoch Times has contacted the White House for comment.
Reuters contributed to this report.