Summary

In a significant demonstration of influence, the crypto industry is advocating for Congress to revoke an IRS policy that threatens the decentralized finance (DeFi) sector.

Key Points

• The Blockchain Association collected 75 endorsements from crypto firms urging Congress to repeal the IRS’s DeFi broker rule enacted in December.
• Senator Ted Cruz is leading efforts to push a resolution allowing the repeal of the federal regulation.

Details

Nearly every leading figure in the cryptocurrency sector has endorsed a letter calling for the elimination of a U.S. tax policy that they argue could undermine DeFi technology by categorizing much of the space as brokers, requiring extensive data collection and reporting.

The Internal Revenue Service implemented a significant digital assets broker rule just before the New Year, aiming to impose similar reporting obligations on DeFi brokers as those affecting securities brokers and exchanges.

Recent regulations can be annulled under the Congressional Review Act, and Senator Cruz has submitted a resolution that would facilitate this repeal. This industry letter, which includes support from notable firms such as Coinbase and Kraken, requests members of Congress to back Cruz’s initiative.

According to the letter, “The DeFi broker rule… represents regulatory overreach that fundamentally misunderstands the technology…”

The companies collectively cautioned that this regulation disproportionately impacts U.S. firms, unfairly placing them at a disadvantage compared to foreign competitors who would not be subject to similar obligations.

They contend that, “This unique burden on American companies alone could cripple DeFi innovation in the country altogether.”

The Congressional Review Act is noteworthy for its ability to repeal regulations; however, its use can prevent similar regulations from being reintroduced in the future.

As Congress may soon shift towards a more crypto-friendly environment due to recent elections, the call to action stands amid the urgent consideration of other federal budget matters.