The U.S. House of Representatives has taken a significant step in shaping the future of cryptocurrency regulation by voting to nullify the IRS DeFi broker rule. On March 11, lawmakers overwhelmingly voted 292-132 in favor of repealing the rule, which sought to impose stringent reporting requirements on decentralized finance (DeFi) protocols.
This vote follows the U.S. Senate’s earlier decision on March 4, where a motion to repeal the rule passed with a 70-27 vote. The resolution now moves forward for a second Senate vote before reaching President Donald Trump, who has expressed his support for overturning the regulation.
Understanding the IRS DeFi Broker Rule
The IRS DeFi broker rule was designed to expand existing tax reporting requirements, requiring DeFi platforms—including decentralized exchanges—to disclose gross proceeds from crypto sales. Additionally, platforms would have to report information regarding taxpayers involved in these transactions.
Proponents of the rule argued that it would enhance transparency and prevent tax evasion, ensuring that cryptocurrency transactions were subject to the same scrutiny as traditional financial instruments. However, critics contend that such regulations would stifle innovation, impose excessive compliance burdens, and drive crypto development away from the U.S.
Bipartisan Support for Repeal
The repeal effort gained bipartisan traction, with all 132 votes to keep the rule coming from Democrats. However, 76 Democrats joined Republicans in voting to overturn the IRS regulation, demonstrating broad consensus that the rule was problematic.
Republican Representative Mike Carey, who introduced the motion to repeal, voiced concerns about the rule’s impact, stating:
“The DeFi broker rule invades the privacy of tens of millions of Americans, hinders the development of an important new industry in the United States, and would overwhelm the IRS.”
House Financial Services Committee Chairman French Hill echoed this sentiment, calling the rule a “clear example of government overreach” that could push U.S. digital asset development offshore.
Opposition to the Repeal
Despite the broad support for nullifying the rule, some lawmakers warned against potential repercussions. Democrat Representative Lloyd Doggett was among the most vocal opponents, arguing that eliminating the rule would create a loophole for tax evasion and illicit financial activities.
“Getting a ‘special interest exemption’ from IRS disclosures makes tax evasion and money laundering so much easier for wealthy Republican donors who have been using these decentralized exchanges,” Doggett stated.
He further cautioned that the repeal could facilitate criminal activities, stating that it would be exploited by “wealthy tax cheats, drug traffickers, and terrorist financiers.”
The White House and Regulatory Perspective
The White House has also weighed in on the matter, with AI and crypto czar David Sacks expressing support for repealing the rule. In early March, the Office of Management and Budget released a statement outlining its concerns, stating:
“This rule … would stifle American innovation and raise privacy concerns over the sharing of taxpayers’ personal information while imposing an unprecedented compliance burden on American DeFi companies.”
These sentiments align with the broader industry argument that excessive regulation could hinder the U.S. crypto sector’s competitiveness in the global market.
Implications for the Crypto Industry
If the repeal is finalized and signed into law, it would mark a significant victory for the crypto industry and privacy advocates. Many DeFi proponents believe that excessive government intervention stifles innovation and risks alienating blockchain developers who may seek more favorable regulatory environments abroad.
However, the decision also raises concerns about how the U.S. government will approach crypto taxation and compliance in the future. Without clear regulatory frameworks, investors and businesses may face continued uncertainty.
What’s Next?
The resolution must still pass another Senate vote before being sent to President Trump. Given his stated support, it is likely that the rule will be officially repealed, but further legislative efforts may follow to create a balanced regulatory approach to cryptocurrency and DeFi.
In the meantime, market participants will be closely watching how regulators and lawmakers move forward in shaping the future of digital assets in the U.S.
