IRS DeFi rule repeal, President Donald Trump signed a bipartisan congressional resolution eliminating a divisive IRS regulation to impose strict reporting requirements on distributed finance (DeFi) platforms. Introduced under the Biden administration in 2023, the rule mandated DeFi systems to gather and disclose user transaction data to the IRS, fulfilling duties set on centralized cryptocurrency exchanges. Critics said the rule threatened innovation and financial privacy and was unworkable for distributed systems without formal ownership or control mechanisms.
With senators voting 65–35 and House members voting 320–115 to reverse the rule, the resolution’s approval represents a rare bipartisan accord in Congress. On the news, crypto markets responded; Ethereum ( ETH) surged 12%, and DeFi tokens like UNI (Uniswap) and MKR (MakerDAO) jumped 20–30%. While the IRS cautioned of a $10 billion annual tax deficit from unreported crypto revenue, industry leaders hailed the action as a triumph for blockchain sovereignty.
Crypto Compliance Clash
Enacted under Section 6050I of the Internal Revenue Code, the IRS’s 2023 regulation demanded that DeFi platforms report Form 8300 for transactions above $10,000, requiring users’ names, addresses, and Social Security numbers. Designed to fight tax evasion, the Bank Secrecy Act governed DeFi protocols like pawnshops or casinos. But DeFi’s distributed character—where protocols run under smart contracts free from intermediaries—made compliance difficult.
Legal challenges sprang forth right away. Arguing that the rule broke the Administrative Procedure Act by neglecting feasibility, the DeFi Education Fund sued the IRS Judges in Texas and Wyoming, which granted injunctions, halting enforcement until courts could render decisions. “You cannot sue a blockchain,” DeFi Alliance CEO Miller Whitehouse-Levine remarked. The IRS was tracking ghosts.
Crypto Regulation Overturned
Driven by Sen. Cynthia Lummis (R-WY) and Rep. Ritchie Torres (D-NY), congressional opposition gathered around Joint Resolution 88. Using the Congressional Review Act (CRA), the resolution lets legislators use simple majority votes to overturn recent federal rules. Lummis presented the rule as a federal overreach: “DeFi isn’t a bank.” Software, this is what I mean. It is ridiculous to regulate codes like a financial institution.
Democrats joined Republicans in disapproving of the plan’s privacy hazards. “Forcing open-source developers to spy on users is antithetical to American values,” Torres added. Initially threatening a veto, the White House changed its mind after Coinbase and Andreessen Horowitz (a16z) started pushing. Long-time cryptocurrency critic President Trump signed the resolution to “unshackle American innovation from bureaucratic overreach.”
DeFi Market Surge
IRS DeFi rule repeal, Markets for cryptocurrencies hailed the repeal. While DeFi tokens beat Bitcoin (BTC), which gained 5%, Ethereum climbed to $4,200, its highest level since 2021. Users returning caused MakerDAO’s DAI stablecoin supply to grow by $1 billion while Uniswap’s daily trading volume surged to $3 billion. Traditional finance paid attention. BlackRock revealed a DeFi-oriented ETF aiming at compound and Aave targets. Citing customer demand, Fidelity included DeFi yield products within its wealth management platform. “DeFi is back,” Coinbase CEO Brian Armstrong remarked. “This is an open finance watershed moment.”
DeFi Reopens Gates
Beginning to reverse geo-blocks, DeFi protocols, which had limited U.S. user access to avoid IRS liability, started Curve Finance restarting dollar-denominated stablecoin swaps; Uniswap restored full U.S. trade. Developers sped up improvements postponed by compliance concerns, including Ethereum’s “Pectra” hard fork, which was meant to improve privacy aspects. Infrastructure providers also changed. While Chainalysis started a tax suite explicitly tailored for DeFi, MetaMask rolled out IRS-compliant reporting capabilities for those who willingly declared taxes. COO Mary-Catherine Lader of Uniswap Labs remarked, “The repeal lets us innovate, not litigate.”
Crypto Crackdown Looms
The IRS denounced the action, estimating the repeal would cost $10 billion yearly in lost tax income. Commission Danny Werfel promised to pursue individual enforcement and spoke of “an epidemic of crypto tax evasion.” Targeting offshore DeFi users, the Treasury Department said it intends to redefine “broker” under tax code Section 6045. Globally, authorities responded carefully. While Japan’s FSA suggested licensing distributed exchanges—a unenforceable measure—the EU’s MiCA framework exempted DeFi from reporting obligations. “The U.S. just handed the EU a regulatory win,” Circle CEO Jeremy Allaire said.
Conclusion
President Trump’s cancellation of the IRS DeFi rule repeal signifies a dramatic change in U.S. crypto policy. Congress has opened the avenue for innovation by realizing the impossibility of imposing conventional financial rules on distributed systems and requiring authorities to reconsider their strategy. The action has energized the DeFi market, drawn institutional money, and rebuilt user confidence.
Still, the fight is hardly won. There is ongoing regulatory ambiguity, and world cooperation is still patchy. Policymakers must balance financial integrity and technological neutrality as DeFi develops. For now, the repeal is a rare triumph for crypto’s promise of decentralization—a reminder that, in the conflict between code and control, flexibility rules.
