U.S. lawmakers have taken the first step to repeal a new tax rule affecting cryptocurrency trading. The rule, known as the "DeFi broker rule," requires brokers to report digital asset transactions to the Internal Revenue Service (IRS). On February 26, the House Ways and Means Committee voted 26 to 16 to approve a resolution to repeal the "DeFi broker rule."

The resolution still needs to pass the full House and Senate before it can be sent to President Donald Trump for his approval.

IRS rule requiring brokers to report crypto transactions to take effect in 2027
The IRS rule, approved on December 5, 2023, expands existing tax reporting requirements to cover decentralized exchanges (DeFi). Under the rule, brokers must report the gross proceeds from cryptocurrency sales and provide detailed information on taxpayers involved in these transactions. The rule is scheduled to take effect in 2027. However, industry experts believe that this rule is both unworkable and unfair. Many decentralized financial platforms do not collect user information, making it difficult to comply with this rule.

Miller Whitehouse-Levine, CEO of the Decentralized Finance Education Fund, called the rule an “illegal and unconstitutional overreach.” He urged lawmakers to overturn it, saying it threatens Americans’ financial freedom and the U.S.’ leadership in financial innovation.

“We call on all members — and everyone who wants to establish America as a hub for financial innovation — to act quickly to support the overturn of this misguided rule and uphold Congress’ original intent,” Whitehouse-Levin said.

Critics say the rule is unfair and unenforceable on a decentralized platform
Ways and Means Committee Chairman Jason Smith strongly opposed the rule, arguing it was rushed through in the final days of former President Joe Biden's term.

“Not only is this unfair, it’s unworkable. DeFi brokers don’t even collect the user information necessary to implement this rule,” Smith said.

Smith also pointed to former IRS Commissioner Charles Rettig’s warning that the rule would generate a large amount of paperwork that the IRS would have difficulty processing efficiently. In addition, Smith claimed that the IRS exceeded its authority when it extended reporting requirements to digital wallet providers. He believes that the rule benefits foreign crypto companies because they are not subject to the same requirements, which harms American investors.

The resolution faces crucial votes in the House and Senate before it can be sent to President Trump.
The resolution now moves to the full House for a vote. If it passes, it will go to the Senate for consideration. If the Senate also approves it, it will go to President Trump, who can choose to sign it into law or veto it.

The repeal effort comes amid growing support for cryptocurrencies in the U.S. government. Hundreds of pro-crypto candidates have won seats in Congress, with Republicans now controlling both the Senate and the House of Representatives.

Since then, there have been several positive developments in the cryptocurrency space. The Securities and Exchange Commission (SEC) has dropped multiple cases against various crypto companies in February. Many industry leaders believe that these changes could make the U.S. government the most pro-cryptocurrency government in history.