Author: Bright, Foresight News
On March 11, local time in the United States, the U.S. House of Representatives passed a resolution with a vote of 292 to 132 to overturn the IRS's (Internal Revenue Service) broker rules for DeFi entities, which required decentralized finance (DeFi) platforms to collect user tax and transaction information. Previously, on March 4, 70 senators had already voted in favor of repealing the regulation, but due to budget rules, the Senate still needs to vote again. If the Senate passes it again and it is signed by President Donald Trump, the rule will be permanently prohibited from being reintroduced.
Abolishing the "DeFi Broker Rule": The Struggle Between Regulation and Decentralized Vision
Since the IRS issued Notice 2014-21 in 2014, officially defining cryptocurrency as property rather than currency and establishing a corresponding tax treatment framework, the struggle between decentralization and regulation has never ceased. The signing of the Infrastructure Investment and Jobs Act (IIJA) in 2021 further required all transactions involving crypto assets to be reported and introduced Form 8300, expanding the reporting scope of crypto asset transactions to include Form 1099, making tax regulation of crypto asset transactions increasingly stringent. Form 1099 not only requires brokers to disclose the date and type of transactions (such as buy, sell, exchange, etc.) in detail but also to accurately report transaction amounts, covering total gains and potential gains, losses, and cost basis information. Crucially, brokers must provide comprehensive information about investors, including name, address, social security number, and extend to specific types, quantities, and fair market values of digital assets.
Starting January 1, 2025, the IRS will officially implement the broker reporting requirements for digital asset sales and transactions (i.e., the "DeFi Broker Rule"), which includes core content such as anti-money laundering (AML), user identity verification (KYC), smart contract audits, fund security, and transparency requirements. This legislation marks an unprecedentedly strict phase of tax regulation for crypto assets in the United States.
Although according to TaXDAO's interpretation, this rule has certain positive effects on anti-money laundering, anti-terrorism, and anti-tax evasion, this initiative has long been met with widespread criticism from the crypto industry. The digital asset think tank Coin Center was the first to express that the proposal is "technically unfeasible." Decentralized platforms fundamentally differ from traditional financial institutions, as they do not hold funds or store customer data like traditional institutions. Industry analysts believe that the "DeFi Broker Rule" adopts the management thinking of TradFi, ignoring the core innovations of DeFi's decentralization and anonymity, and imposes severe compliance management pressure on corresponding crypto institutions, significantly increasing operational costs.
On February 20, 2025, the Blockchain Association, along with 75 participants from the cryptocurrency industry, signed an open letter calling on the U.S. Congress to repeal the IRS's DeFi Broker Rule, with notable participants including well-known cryptocurrency companies like Coinbase, Kraken, and Uniswap Labs. The letter pointed out that the "DeFi Broker Rule," finalized just before the end of the Biden administration, is a manifestation of "overregulation," fundamentally misunderstanding the technology it attempts to regulate and ignoring the intent of Congress.
a16z Crypto's regulatory head Michele Korver also tweeted on X, stating that the new broker reporting rules issued by the U.S. Treasury pose a direct threat to the development vision of DeFi and may hinder the future of DeFi innovation in the U.S.
It is undeniable that since Trump took office, despite the market's negative attitude towards his expectations, cryptocurrency regulatory policies have indeed made substantial breakthroughs. On March 4, 2025, the "Crypto Tsar," current White House AI and cryptocurrency director David Sacks, posted on X, stating, "The White House is pleased to announce support for the Congressional Review Act (CRA) proposed by Senator Ted Cruz and Congressman Mike Carey to repeal the so-called 'DeFi Broker Rule'—an attack on the crypto community by the Biden administration at the last moment."
Post-Bill Era: Three Major Potential Regulatory Variables Emerge
Now, while the House's overturning resolution has lifted the shackles on DeFi, the regulatory game in the crypto industry is far from over. Based on legislative dynamics and policy frameworks, three major potential regulatory directions may become the focus of the next phase:
1. Accelerated Implementation of Stablecoin Legislation. The Trump administration has clearly listed stablecoins as "payment infrastructure," with the Senate's "GENIUS Act" and the House's "Stablecoin Act" advancing simultaneously, aiming to establish a federal unified licensing system requiring issuers to maintain 100% reserves and undergo bank-level audits. This means that the issuance thresholds for dollar stablecoins like USDC and BUSD will be significantly raised, while algorithmic stablecoins may be directly included under securities regulation. The Blockchain Association's analysis indicates that if stablecoin legislation is passed, the U.S. could become the first major economy with systematic stablecoin rules, but it may also force small and medium issuers out of the market.
2. Intensified Jurisdictional Dispute Between SEC and CFTC. Although the "DeFi Broker Rule" has been overturned, the SEC continues to strengthen the identification of tokens as securities through the "Howey Test." The recent termination of the Uniswap Labs investigation has released subtle signals—when a protocol achieves a high degree of decentralization (such as lacking centralized team control), the SEC tends to classify it as a "commodity," while the opposite is viewed as "unregistered securities." This logic of "the degree of technical decentralization determines regulatory jurisdiction" is prompting project parties to accelerate their de-licensing transformation. Meanwhile, the CFTC is vying for regulatory authority over spot exchanges based on the Digital Commodity Consumer Protection Act, with platforms like Coinbase applying for dual licenses, leading to a 37% year-on-year increase in compliance costs.
3. On-Chain Taxation and Anti-Money Laundering Regulation Shifts to "Technical Tracking." Although the IRS has lost the authority for mandatory DeFi reporting, it has joined FinCEN to expand the use of on-chain analysis tools. Data from Q1 2025 shows that it tracked $1.2 billion in crypto crime funds through platforms like Arkham and Elliptic, a 210% increase compared to the same period last year. Notably, while the Trump administration's executive order prohibits CBDCs, it requires the Treasury to study "Bitcoin reserves and tax transparency" technical solutions, not ruling out future pilot programs for automatically withholding capital gains tax through smart contracts. This trend of "regulatory technology replacing rule enforcement" is forcing exchanges and wallet service providers to upgrade their KYT (Know Your Trade) systems.
As the struggle over the "DeFi Broker Rule" is about to conclude, compliance resources in crypto institutions are beginning to shift towards stablecoin registration, token attribute audits, and on-chain risk control systems. For example, Coinbase's chief compliance officer revealed that the company has formed a 300-person team dedicated to stablecoin license applications while collaborating with AWS to develop a "decentralization degree certification" tool.
Meanwhile, Uniswap Labs, after the termination of the investigation, announced that it would lower the community proposal threshold for governance token UNI from 10,000 to 5,000 to accelerate the decentralization process. These actions confirm the industry consensus: U.S. regulation is shifting from a "one-size-fits-all" approach to "technology feature matching regulation." Whether it can find a technical fulcrum between innovation and compliance will be the key to competition in the next phase. Perhaps this will also become a new point of explosion after the market's deflation.
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