In a significant move for the cryptocurrency landscape in the United States, the Senate has recently quashed a rule proposed by the Internal Revenue Service (IRS) pertaining to “Gross Proceeds Reporting by Brokers That Regularly Provide Services Effectuating Digital Asset Sales.” This rule, which was set to require decentralized finance (DeFi) platforms to report detailed customer information to the IRS beginning in the 2027 tax year, aimed to enhance tax compliance by standardizing the treatment of DeFi platforms alongside centralized exchanges and stock brokerages.
The bipartisan vote, spearheaded by Senator Ted Cruz, emphasized that DeFi platforms do not function as traditional brokers and would incur significant compliance costs under the proposed regulation. The repeal passed overwhelmingly, with a vote of 70 to 27, where every vote in favor of maintaining the rule came solely from Democrats.
DeFi Off The Hook
Coinbase’s chief legal officer, Paul Grewal, remarked, “The Democrats and Republicans can still do things together when they just try,” reflecting a rare instance of consensus over crypto regulation.
17 Democrats and all Republicans in the Senate just voted to repeal the IRS DeFi Reporting Rule. Ds and Rs can still do things together when they just try. https://t.co/ajbGKCSbT1
— paulgrewal.eth (@iampaulgrewal) March 4, 2025
Senator Cruz described the repeal as a powerful statement highlighting the significance of crypto in contemporary politics, asserting that the issue had been a central topic in the last election. His remarks resonate with the idea that bipartisan efforts can prevail in the landscape of crypto regulatory reforms.
With the repeal of this regulation, Republicans are also eyeing other Biden-administration rules that can be addressed through the Congressional Review Act, suggesting a broader agenda aimed at regulatory reassessment across various sectors.
In contrast, sentiments from critics of the repeal, such as Mike Kaercher, deputy director of the Tax Law Center at New York University, indicate concern. He articulated that repealing the rule might drive more segments of the digital asset industry underground, complicating the battle against various criminal activities including tax evasion and drug trafficking.
“It would encourage more of the digital asset industry to move into the shadows, making it more difficult to counter crimes ranging from tax evasion to fentanyl trafficking to terrorist financing,” he stated in an interview with The Wall Street Journal.
Meanwhile, the total value locked in DeFi has experienced fluctuations, recently witnessing a rally in the crypto market, although it has since retreated by 33% to fall to $102 billion. This figure stands far below the December 2021 peak of $212 billion, as DeFi primarily hinges on Ethereum—an asset that has faced considerable challenges this year.
Market Reaction
The crypto markets have noted a minor resurgence, with total capitalization increasing by 2% to reach approximately $2.97 trillion. Bitcoin saw a recovery, reclaiming $88,000 before experiencing a slight pullback, influenced by comments from Commerce Secretary Howard Lutnick about potential tariff relief pathways for goods from Mexico and Canada.
Ethereum also noted a modest 4% increase, although it remains at its lowest level in over a year, just above $2,150. Other cryptocurrencies such as XRP, Cardano (ADA), Hedera (HBAR), and Bitcoin Cash (BCH) exhibited larger gains during this period.
This pivotal moment in the U.S. Senate not only reshapes the regulatory framework governing DeFi platforms but also highlights the ongoing dialogue between policymakers regarding the future of cryptocurrency in America.
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