How many difficulties are there in the House of Representatives overturning the "Defi Broker Rules"?

Author: Bright, Foresight News

On March 11, local time in the United States, the U.S. House of Representatives passed a resolution by 292 to 132, overturning the IRS's broker rule for DeFi entities, which requires decentralized finance (DeFi) platforms to collect user tax and transaction information. Previously, on March 4, 70 members of the Senate voted to repeal the rule, but the Senate still needs to vote again due to budget rules. If the Senate passes again and is signed by President Donald Trump, the rule will be permanently prohibited from being re-proposed.

Abolishing the "Defi Broker Rules": The Road to Confrontation between Regulation and Decentralized Vision

Since the IRS released Notice 2014-21 in 2014, officially defining cryptocurrencies as property rather than currency, and establishing a corresponding tax treatment framework, the struggle between decentralization and censorship has not subsided. In 2021, the signing of the Infrastructure Investment and Employment Act (IIJA) requires that all transactions involving crypto assets must be declared, and the 8300 form was introduced to expand crypto asset transactions to the reporting scope of 1099 form, making the tax supervision of crypto asset transactions increasingly strict. The 1099 Form not only requires the broker to disclose the date and type of transaction (such as buying, selling, exchange, etc.), but also accurately report the transaction amount, covering the total income and possible income, losses and cost basis information. What is particularly critical is that brokers need to provide comprehensive information about investors, including names, addresses, social security numbers, and expand to the specific types, quantities and their fair market value of digital assets.

Starting from January 1, 2025, the IRS will officially implement the Act on Broker Reporting Digital Asset Sales and Transactions (i.e. the "DeFi Broker Rules"), whose core content includes anti-money laundering (AML), user identity verification (KYC), smart contract audit, fund security and transparency requirements. The bill marks an unprecedentedly strict phase in the U.S. tax regulation on crypto assets.

Although according to TaXDAO's interpretation, this rule has a certain positive effect on anti-money laundering, anti-terrorism, and anti-tax evasion. But this move has long attracted widespread criticism from the crypto industry. Digital asset think tank Coin Center took the lead in proposing that the proposal was “technically unfeasible.” There are essential differences between decentralized platforms and traditional financial institutions, which do not hold funds or store customer data like traditional institutions. Industry analysts believe that the "DeFi Broker Rules" follow the management ideas of TradFi, ignore the core innovations of DeFi's decentralization and anonymity, and bring serious compliance management pressure to corresponding encryption institutions, greatly increasing the operating costs of institutions.

On February 20, 2025, the Blockchain Association and 75 cryptocurrency industry participants signed an open letter calling on the U.S. Congress to abolish the IRS's DeFi broker rules, with well-known cryptocurrency companies such as Coinbase, Kraken and Uniswap Labs among the participants. The letter pointed out that the "DeFi broker rules" finalized at the end of the Biden administration's term is a manifestation of "overregulation", which fundamentally misunderstands the technology it attempts to regulate and ignores Congress' intentions.

​a16z Crypto Head of Regulation Michele Korver also tweeted on X that the new broker reporting rules released by the U.S. Treasury pose a direct threat to the development vision of DeFi and may hinder the future of DeFi innovation in the U.S.

It is undeniable that since Trump came to power, although the market has negatively expressed its expectations, cryptocurrency regulatory policies have indeed made substantial breakthroughs. On March 4, 2025, local time in the United States, David Sacks, the current White House AI and cryptocurrency director, posted on X, "The White House is pleased to announce support for the Congressional Review Act (CRA) proposed by Senator Ted Cruz and Congressman Mike Carey to revoke the so-called "DeFi broker rules" - this is the Biden administration's last-minute attack on the crypto community.

Post-Bill Era: Three Potential Regulatory Variables Surface

Today, although the House of Representatives' overturning resolution has lifted the shackles for DeFi, the regulatory game in the crypto industry is far from over. According to legislative dynamics and policy framework, three potential regulatory directions may become the focus of the next stage:

1. Stablecoin legislation is being implemented at an accelerated pace. The Trump administration has clearly listed stablecoins as a "payment infrastructure". The Senate GENIUS Act is being promoted simultaneously with the House of Representatives' Stablecoin Act, and plans to establish a federal unified license system, requiring issuers to maintain 100% reserves and undergo bank-level audits. This means that the issuance threshold for USD stablecoins such as USDC and BUSD will be greatly increased, and algorithmic stablecoins may be directly included in the scope of securities supervision. The Blockchain Association analyzed that if stablecoin legislation is passed, the United States may become the first major economy to have systematic stablecoin rules, but it may also lead to small and medium-sized issuers being forced to withdraw from the market.

2. The dispute over jurisdiction between the SEC and the CFTC has intensified. Although the "Defi Broker Rules" were overturned, the SEC still strengthened the identification of securities attributes of tokens through the "Ouwei Test". The recent Uniswap Labs investigation termination released a subtle signal—When the protocol is highly decentralized (such as uncentralized team control), the SEC tends to identify as "commodity" and vice versa. This logic of "the degree of technology decentralization determines the ownership of supervision" has prompted the project party to accelerate the delicensing transformation. At the same time, CFTC is competing for spot exchange regulatory rights in accordance with the Digital Commodity Consumer Protection Act. Platforms such as Coinbase have applied for a double license, and the compliance cost has increased by 37% year-on-year.

3. On-chain taxation and anti-money laundering supervision have shifted to "technical tracking". Although the IRS has lost the right to mandatory DeFi reporting, it has been used in conjunction with FinCEN's extended on-chain analysis tool. Data in Q1 2025 showed that its crypto crime funds tracked through platforms such as Arkham and Elliptic reached US$1.2 billion, an increase of 210% over the same period last year. It is worth noting that while the Trump executive order bans CBDC, it requires the Ministry of Finance to study the technical solution of "Bitcoin Reserves and Tax Transparency", and does not rule out the pilot program of automatic withholding of capital gains tax through smart contracts in the future. This trend of "regulatory technology replacement rules to force" forces exchanges and wallet service providers to upgrade the KYT (Know Your Trade) system.

As the battle for "Defi Broker Rules" is about to come to an end, the compliance resources of crypto institutions have begun to tilt towards stablecoin filing, token attribute audit, and on-chain risk control systems. For example, Coinbase’s chief compliance officer revealed that the company has formed a 300-person team to specialize in stablecoin license application, and is working with AWS to develop a “decentralized degree certification” tool.

After termination of the investigation, Uniswap Labs announced that it would reduce the threshold for community proposals for the governance token UNI from 10,000 to 5,000 to accelerate the decentralization process. These actions confirm the industry consensus: US regulation is shifting from "one-size-fits-all" to "technical feature matching supervision". Whether it can find a technical fulcrum between innovation and compliance will become the key to the next stage of competition. Perhaps, this will also become a new explosion point after the market is de-bubbled.