The U.S. House of Representatives has passed H.J. Res 25, effectively rejecting the Internal Revenue Service’s (IRS) controversial broker rule. The resolution aims to protect decentralized finance (DeFi) innovation and prevent regulatory overreach.
Taxing Requirement
According to the DeFi Education Fund, 292 lawmakers voted in favor of the resolution while 132 went against it, nullifying a rule that would have imposed strict reporting requirements on DeFi platforms. The 292 included all House Republicans, apart from a few that didn’t show up, as well as 76 Democrats. The contentious rule, pushed by the U.S. Treasury and the IRS, sought to improve tax compliance by treating DeFi platforms and software providers like traditional brokers. Critics argued it ignored the unique nature of decentralized technology, placing undue burdens on developers. In December last year, Andreessen Horowitz joined a legal challenge against the regulation.
Market Reaction
Despite the development, at the time of writing, the broader crypto market was down 0.7% in the last 24 hours. However, some high-cap assets including Bitcoin (BTC), XRP, and Dogecoin (DOGE) were showing signs of recovery. BTC was up 1.1%, while XRP and DOGE recorded improvements at 3.1% and 3.4%, respectively. In the past week, data from CoinGecko shows that the digital asset sector lost nearly 10% as it battled a period of enhanced volatility. During this time, Bitcoin dropped to a four-month low, dipping below the $77,000 mark, while Ethereum (ETH) slipped below $1,800 for the first time in nearly 16 months.
Conclusion
By rejecting the IRS's broker rule for DeFi, the US Congress has shown a commitment to preserving the innovative potential of decentralized finance and willingness to work on creating clearer regulatory frameworks for cryptocurrency.
The rejection of the IRS's proposed rule represents a significant victory for DeFi advocates and highlights the need for regulation to adapt to modern technological realities.
