US lawmakers are working on a Congressional Review Act (CRA) that aims to challenge the IRS broker rules, requiring DeFi participants to report user data to the agency. Republican Senator Ted Cruz is leading efforts to introduce the CRA, with an initial vote scheduled for March 5 but potentially facing delays due to scheduling conflicts. The CRA seeks to repeal the IRS broker rule, expanding the definition of a ‘broker’ to include DeFi developers, which advocates argue is not suited to the unique nature of DeFi.
The IRS broker rule, finalized last year, imposes new tax reporting requirements on entities handling digital assets, including DeFi front-ends. It requires tracking user activity, reporting transactions, implementing KYC processes, and enforcing compliance measures for all digital assets, including NFTs and stablecoins. Critics, like Peter Van Valkenburgh of Coin Center, argue that treating software developers and infrastructure providers as brokers undermines privacy rights, disregards bipartisan concerns, and hinders technological progress. The outcome of the vote will indicate the US government’s stance on digital asset regulation going forward.
Revoking the IRS broker rule would align with the pro-crypto stance of the Trump administration and support the influence of pro-crypto lawmakers. This vote will test whether the new Congress will indeed take a friendlier stance toward crypto. The CRA aims to address the concerns of DeFi participants regarding the IRS broker rules and ensure that regulations support the growth and innovation of digital assets in the United States. It remains to be seen how the vote will impact the regulatory environment for DeFi and digital assets moving forward.
