DeFi advocates have claimed that the reporting required by the IRS broker-dealer rule would have pushed DeFi development overseas.
Posted January 21, 2025 at 2:51 PM EST.
Ohio Republican Rep. Mike Carey will introduce a resolution to overturn a controversial IRS rule that the industry saw as an attack on DeFi, at 3 p.m. ET, Carey’s office told Unchained.
The IRS Broker Rule, announced just before the New Year, infuriated the crypto industry by expanding the definition of a “broker,” a label that requires extensive reporting to the IRS, to include DeFi developers.
His resolution uses the Congressional Review Act, which gives Congress a mechanism to reverse federal agency rules, given Congress until early March to overturn broker rule. The text of the resolution is included below.
Recognize that Blockchain technology is different
The IRS broker rule “does not take into account the nature of blockchain itself and distributed systems in general,” explained Seth Hertlein, vice president of global policy at Ledger. “It forces centralization where it doesn’t exist and doesn’t need to be such that it sort of defeats the purpose of decentralized networks.”
Texas Republican Sen. Ted Cruz is also expected to announce three resolutions later today, as first reported by Axios last week, targeting the IRS broker rule as well as rules on energy and internet access passed in the final days of Biden’s presidency. Carey’s resolution, however, will only target the IRS’s broker rule.
A debate over how to tax DeFi
The Treasury Department framed the broker rule as a way to ensure that tax revenues owed to the government are collected from both DeFi projects and centralized companies. The rule was first propose in August 2023. Carey wrote a letter to the Treasury criticizing the rule on December 6.
But DeFi advocates argued, months before the rule was officially introduced, that compliance would be so arduous that it would push DeFi development overseas.
Three industry groups (Blockchain Association, DeFi Education Fund and Texas Blockchain Council) continued the IRS after the bill was officially introduced on December 27.
A resolution must be adopted by both houses of Congress by majority vote. By introducing resolutions in the House and Senate, it is much more likely that the CRA will work to repeal the Broker Rule in a timely manner.
Click here to read the full text of the resolution.