Blockchain Association Calls on Congress to Repeal IRS DeFi Broker Rule
Coalition of Crypto Firms Voices Concerns Over Regulatory Burdens
The Blockchain Association, an organization that represents 76 cryptocurrency firms, has formally urged Congress to support the repeal of the Internal Revenue Service’s (IRS) new decentralized finance (DeFi) broker rule. This coalition, which includes well-known entities such as 0x Labs, a16z Crypto, Aptos Labs, Crypto.com, Grayscale, Dapper Labs, and Ava Labs, claims that the rule poses a significant threat to innovation within the U.S. crypto landscape.
On February 19, the Blockchain Association sent a letter to key congressional leaders, including Senate Majority Leader John Thune, Senate Minority Leader Chuck Schumer, House Speaker Mike Johnson, and House Minority Leader Hakeem Jeffries. The letter specifically advocates for the Congressional Review Act (CRA) resolution S.J.Res. 3, led by Senator Ted Cruz, which seeks to overturn the controversial regulation finalized during the closing days of former President Joe Biden’s administration.
The Controversial DeFi Broker Rule
The DeFi broker rule, which is set to be implemented in 2027, dramatically expands the definition of a “broker” to encompass software providers that facilitate access to DeFi protocols. This means that decentralized exchanges will be subject to the same reporting requirements as traditional brokers, which has raised significant concerns within the industry.
The IRS’s disclosure on December 27, 2024, indicated that the rule could potentially impact around 875 DeFi brokers operating within the United States. Critics argue that such measures create unnecessary complexities that could stifle growth in the sector.
Industry Response: Innovation at Risk
In their letter, the Blockchain Association articulates that compliance with the DeFi broker rule imposes "severe and unjustified burdens" on American companies engaged in decentralized finance. The organization asserts that the regulation risks undermining U.S. competitiveness in financial technology and could significantly hinder innovation in digital assets.
"Under the rule, software companies that never take custody or control of users’ assets will be required to radically rebuild their services in order to unnecessarily collect and then report to the government the personal identifying information and transaction details of potentially tens of millions of American users," the letter states. This requirement raises concerns over user privacy and operational feasibility.
Additionally, the Blockchain Association argues that the measure unfairly targets U.S.-based crypto firms, potentially crippling DeFi innovation in one of the industry’s most competitive markets.
A Call to Action
The Blockchain Association has dubbed the introduction of the DeFi broker rule a "midnight rulemaking" effort and insists that Congress should be the governing body making decisions that could have significant repercussions for the financial landscape. The letter concludes with a strong call for Congress to vote in favor of the CRA resolution, emphasizing the importance of supporting DeFi innovation, promoting economic growth, creating jobs, and advancing financial inclusion within the United States.
As the debate unfolds, the cryptocurrency industry continues to closely monitor the situation, hopeful that lawmakers will heed their concerns and act to protect the future of decentralized finance in the U.S.
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