Intelligence Desk | Cryptocaster
In a decisive win for the digital asset sector, the U.S. Congress has formally repealed the Internal Revenue Service’s controversial attempt to classify decentralized finance (DeFi) platforms and non-custodial wallet providers as tax-reporting “brokers.” President Donald Trump signed the resolution into law on April 10, 2025, forcing the IRS to abandon its expanded broker rule issued just months earlier.
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The move is being hailed by crypto advocates as a rare moment of regulatory clarity in an industry long beset by ambiguity, overreach, and legal limbo.
IRS Rule Sparked Industry-Wide Alarm
At the heart of the controversy was a rule finalized in December 2024, stemming from the 2021 Infrastructure Investment and Jobs Act. That law gave the Treasury Department authority to expand Form 1099 reporting to digital assets. However, the IRS’s interpretation of “broker” went far beyond traditional custodial platforms, reaching into the DeFi space, smart contracts, and wallet developers.
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Industry experts warned that the rule was not only technologically infeasible but legally misguided. Developers of permissionless protocols lack the ability to identify or track users—yet the IRS would have required them to issue Form 1099-DA for user gains.
“This would have meant millions of unnecessary forms, privacy violations, and ultimately an impossible compliance burden,” said Sheila Warren, CEO of the Crypto Council for Innovation.
Congress Uses Rare Legislative Tool to Overturn Rule
Lawmakers across party lines agreed. In one of the most bipartisan crypto-related actions to date, the House voted 292–132 in favor of the repeal, followed by a 70–28 Senate vote. The tool used was the Congressional Review Act, which allows Congress to overturn recently finalized federal rules.
Representative Mike Carey (R-OH), who introduced the repeal resolution, described the IRS rule as “a reckless threat to American financial innovation.” Carey and others pointed out that the rule would have driven DeFi development offshore and subjected developers to undue risk and legal liability.
Because the rule was repealed under the Congressional Review Act, the IRS is now prohibited from reissuing a “substantially similar” regulation without explicit congressional approval.
Centralized Exchanges Still on the Hook
While DeFi platforms are off the hook for now, centralized exchanges are still under regulatory scrutiny. Starting in 2025, companies like Coinbase, Kraken, and Gemini must comply with Form 1099-DA reporting for users who buy and sell digital assets.
These institutions are already implementing Know Your Customer (KYC) protocols, making them the easiest targets for IRS compliance demands. Many in the industry expect the IRS to ramp up enforcement efforts against individual users through centralized exchanges and fiat on-ramps.
“We’re not letting go of crypto enforcement,” IRS Commissioner Daniel Werfel said in a recent statement. “But we do acknowledge the importance of clarity and technological feasibility.”
What This Means for the Future of Crypto Regulation
The repeal represents a rare regulatory rollback in a sector more accustomed to expanding scrutiny. It also suggests that Congress is beginning to take a more active role in shaping crypto policy, rather than leaving it solely to federal agencies.
Advocacy groups are now calling for a comprehensive legislative framework that separates centralized financial intermediaries from decentralized code-based protocols. Without such clarity, legal uncertainty will continue to hamper innovation and invite uneven enforcement.
“There’s a big difference between a wallet developer and a brokerage firm,” said Kristin Smith, CEO of the Blockchain Association. “Congress is finally recognizing that.”
For now, the DeFi community is celebrating a much-needed reprieve. But the larger battle over how digital assets are defined, taxed, and tracked in the United States is far from over.
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