The recent IRS reporting rules labeling DeFi platforms as brokers have sparked wide discussion in the crypto sector.
IRS New Rules for DeFi
On December 27, 2024, the IRS issued its final rule, which redefines 'trading front-end service providers' as brokerages, including decentralized exchanges. This change is set to take effect in 2027.
Paths for DeFi's Future
Alex Thorn from Galaxy Digital outlined three potential paths for DeFi in light of the IRS's new rules: comply with the requirements and accept the brokerage designation, restrict US user access, or forego smart contract upgrades and revenue generation. Thorn also mentioned that highly decentralized applications might be exempt from these obligations.
Criticism and Legal Actions Against IRS
The IRS rule has faced widespread criticism from industry advocacy groups and executives, who deem it as governmental overreach. A joint lawsuit was filed against the IRS by the Texas Blockchain Council, the Blockchain Association, and the DeFi Education Fund.
As the crypto industry considers ways to adapt to the new regulations, their impact on DeFi remains a focal point of ongoing debate and analysis.
