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author:Token Dispatch, Prathik Desai,Compilation: Block unicorn
U.S. President Donald Trump signed a resolution last Thursday to repeal the IRS’s controversial decentralized finance (DeFi) broker rules for his first cryptocurrency victory.This is also the first crypto-related bill signed by the president in the United States.After years of regulatory uncertainty, the crypto industry has finally found solid evidence that Washington is listening.
The resolution passed with impressive cross-party support, with the Senate 70 to 28 and the House of Representatives 292 to 132, indicating that cryptocurrencies may finally surpass political divisions.
This reversal is not just about eliminating a problematic tax rule;It could be a prelude to determine how a decentralized financial ecosystem evolves among the world’s largest economies.
In this article, we’ll take you through the origins of the DeFi broker rules, the importance of their abolition, and, more importantly, how it will lay the foundation for a new approach to crypto regulation under the Trump 2.0 administration.
Biden’s “gift” of farewell
On December 27, 2024, the Biden administration finalized a controversial IRS rule in its final weeks requiring “DeFi brokers” to collect and report user transaction information — the last crackdown on crypto innovation before the government’s change of leadership.
The rule extends the definition of “broker” in the Infrastructure Act of 2021, brings DeFi platforms into it, requiring them to issue Form 1099 to users and report transaction details to the IRS, which was originally scheduled to take effect on January 1, 2027.
This shocked industry experts and prompted them to fight back.
Why?Seven words:Technically uncompliant.
The Biden administration has specifically targeted “front-end service providers.”Think of MetaMask or Uniswap websites, where millions of users exchange tokens—these intuitive interfaces allow average users to access decentralized protocols.
Under the rule, these front-ends need to collect names, addresses, phone numbers and transaction details—and in a truly decentralized ecosystem, they simply cannot get this information.
When facing this contradictory criticism, the IRS responded with a perfunctory sentence:
“People with technical expertise and engaged in trade or business related to financial services shall comply with the same rules as those of other persons operating financial services.”
This reveals one thing-a profound misunderstanding of how decentralized systems work.Industry leaders describe it as“Irreconciliational contradiction”——Authorize entities to collect information that they simply cannot access.
This means that the platform either must rebuild the protocol to collect information that violates the core principles of user privacy and decentralization, or exits the U.S. market altogether.
The Biden Treasury Department extended the rules to DeFi at the last minute, which was seen as an executive overreach without Congress.
David Sacks, Trump’s AI and crypto chief, unceremoniously called it “midnight regulations” and said it“Will kill U.S. innovation, raise privacy concerns and impose an unprecedented compliance burden on U.S. DeFi companies.”
Turnaround
The importance of abolishing the rule itself is much more than a minor revision of tax policies.
According to the rules used by Congress to abolishCongressional Review Act, the IRS shall not issue “substantively similar” regulations without the authorization of the new Congress.This is not just a pause of the rules, but a breathing space for developers and entrepreneurs who can now develop with more confidence.
The adoption of the resolution shows that the goal pursued by the crypto industry over the years has finally been achieved:Reached significant political capital in Washington.
Want to hear more good news?This may just be the beginning.Treasury Secretary Scott Bessent said at the recent White House Digital Assets Summit that plans to “revoke and modify” relevant crypto tax rules.
Cross-party and industry support
The most important feature of this reversal is its cross-party victory nature.
When Republicans and dozens of Democrats vote together to overturn the rules of the Democratic administration, it reveals a shift in the political importance of cryptocurrencies and the fact that financial technology innovation deserves room for growth.
This marked a major shift in the Securities and Exchange Commission era under Gary Gensler, when Democratic leadership largely supported radical law enforcement actions against crypto companies.
Even Senate Minority Leader Chuck Schumer broke the party’s leadershipStand, support this measureThis political consideration fully demonstrates the growing importance of cryptocurrencies in elections.
Industry groups that once struggled to gain recognition have now become influential voices.
The Blockchain Association and the DeFi Education Fund led an active lobbying campaign that successfully reversed the Democratic Party’s voting situation and eventually won a majority that could overturn the veto.Their success shows that cryptocurrency advocacy has matured rapidly, and its outreach efforts to key legislators are very mature, focusing on specific policy issues rather than general blockchain education.
When the Biden administration introduced the rule, the blockchain association promised to take “stimulating action.”They did deliver on their promises.
Four months after the lawsuit was filed, the association now celebrates the repeal of the rules that threaten to end the U.S. crypto industry.
Importantly, the victory was achieved despite some influential Democrats’ objections, believing that the resolution might fuel tax evasion.
Rep. Richard Neal, Democrat of Massachusetts, had warned that the move could cost the government $4 billion in tax revenue.The revenue is estimated to come from unreported capital gains, which will remain the focus of controversy as crypto advocates push for further regulatory easing.
Global Positioning
The signing of the resolution has greatly changed the U.S. position in the global crypto dominance competition.
The contrast is sharp.Just a few months ago, crypto companies were abandoning the U.S. market due to regulatory uncertainty.
Coinbase had prepared a contingency plan to move overseas.Now, Trump 2.0 administration positions the United States as“The Crypto Capital of the World”The campaign promise seems to be taking effect.
With global investment in DeFi surges – and currently about $90 billion is locked in the agreement, according to DefiLlama, countries that create a friendly regulatory environment will gain enormous economic benefits: high-skilled jobs, tax revenue from legal operations, and technical leadership.
The resolution also sends a strong signal to regions and countries such as Hong Kong, the UAE and Japan that are positioned as crypto-friendly alternatives.
For crypto entrepreneurs and investors around the world, Thursday’s signing delivered a clear message:The United States opens to business.
The way to balance
The resolution raises reasonable questions about the balance between innovation and tax compliance.
Critics, such as Rep. Lloyd Doggett, a Democratic Texas, argued that repealing the rule would create exploitable loopholes for wealthy investors.
This concern is not completely unfounded.
The decentralized nature of the DeFi protocol means that transactions are conducted without records from traditional intermediaries.While the blockchain itself is transparent, it is still challenging to associate a wallet address with a taxpayer.Without some kind of reporting mechanism, tax compliance depends largely on voluntary disclosure.
Some policy experts have proposed a compromise—creating an optional compliance framework in exchange for regulatory clarity in some disclosures.This “safe harbor” approach will allow the DeFi protocol to operate legally, while gradually introducing appropriate safeguards.
Our Views
Trump’s signing of the resolution is a breakthrough in resolving the core contradictions of cryptocurrency regulation that has plagued the industry since day one:The collision between regulatory frameworks and digital native financial systems in the industrial era.
The victory shows that Washington finally admits that forcing decentralized systems to adapt to the centralized regulatory framework is not feasible.Innovation requires proper guardrails, not barriers to modification.
This moment reveals a deeper content of American regulatory philosophy.For decades, U.S. financial regulation has followed a model:Innovation occurs, problems emerge, regulatory responses.DeFi broker rules attempt to pre-regulate before understanding the natural evolution of technology.Its failure shows that the United States is returning to its traditional advantages—Allow innovation to flourish while addressing specific problems as they arise.
Celebration should be pragmatic.The crypto industry faces a critical credibility test.After gaining room for regulatory breathing, it must now offer tangible benefits beyond traders’ profits.Can DeFi significantly improve financial availability?Will it reduce daily transaction costs?Can it create more efficient markets and benefit the wider economy?
The cross-party nature of this victory is both an opportunity and a warning.While encryption has surpassed partisan boundaries today, its support still depends on the practicality of presenting the real world.If the industry cannot transcend speculation and solve practical problems, today’s allies may become tomorrow’s critics.
This reversal is a wake-up call for global competitors who believe the U.S. has abandoned its leadership in digital asset innovation.The United States has unparalleledCapital Market,Technical talentsandRegulatory flexibility——When these factors work together, a strong competitive advantage will be created.
The road ahead is still full of challenges.The Securities and Exchange Commission’s regulation of tokens, the Commodity Futures Trading Commission’s jurisdiction over derivatives, and the bank’s concerns about stablecoins — these issues remain unresolved.But this resolution shows thatIn situations where broad ideological arguments often fail to work, well-organized advocacy activities focused on specific technical issues can succeed.
The window of innovation has been opened.Now, the industry needs to work with regulators to create a framework that protects consumers and drives true innovation.Thursday’s signing suggests that the two sides may be ready for such a conversation for the first time.
