The world of decentralized finance (DeFi) just witnessed a pivotal event as the U.S. House Ways and Means Committee took steps to overturn an IRS tax rule affecting DeFi, which could have significant regulatory implications in the United States.
Controversial IRS Rule for DeFi
In December, the IRS issued a rule classifying many DeFi protocols as 'brokers' for tax purposes, causing concerns in the crypto industry. The industry argues that this classification misunderstands DeFi's nature and stifles innovation, as DeFi protocols are often automated and decentralized, not fitting the traditional broker role.
House Committee's Decision
The U.S. House Ways and Means Committee voted 26-16 to advance a resolution to repeal the IRS DeFi rule. This resolution, using the Congressional Review Act, allows Congress to overturn newly finalized agency rules.
Implications of the Rule's Repeal
If the IRS rule is repealed, U.S. tax revenue could decrease by $3.9 billion over the next decade. However, it could also reduce regulatory uncertainty in the DeFi sector, attract crypto businesses, and promote economic growth through innovation.
The House Committee's vote to repeal the IRS tax rule is a positive development for the crypto industry, indicating a growing recognition among lawmakers of the complexities of DeFi and the need for balanced regulatory approaches.
