The historical inevitability behind the new DeFi tax regulations: thoughts on the new financial colonization of the United States and the decision-making ideas of industry practitioners

Regulatory document: https://public-inspection.federalregister.gov/2024-30496.pdf

The U.S. Department of the Treasury and the Internal Revenue Service recently issued an important new regulation (RIN 1545-BR39), which expands the scope of application of existing tax laws and includes DeFi front-end service providers within the definition of "broker". These service providers, including any platform that directly interacts with users (such as Uniswap’s front-end interface), are required to collect users’ transaction data starting in 2026 and submit the information to the U.S. Internal Revenue Service (IRS) via Form 1099 starting in 2027 , the content includes the user’s total income, transaction details and taxpayer identity information.

We all know that Trump’s political scene is never short of drama, and his attitude towards cryptocurrency is even more so. From the early criticism of Bitcoin, calling it an "air-based scam", to the later attempts at NFT projects and the issuance of the Defi project WorldLibertyFinancial (WLF), he also boldly proposed the idea of ​​incorporating Bitcoin into the national strategic reserve "From American History" Successful strategic land acquisition to Bitcoin reserves: Forward-looking vision of the "2025 Bitcoin Strategic Reserve Draft", his behavior reflects the drive of personal interests and also metaphors the complex position of the encryption industry in the American political system.

Although the new regulations are still one or two years away from taking effect, and there is also some controversy over the definition of "broker", after all, the old set of regulatory policies cannot be applied to crypto projects so rigidly, so it may be overturned. , but Aiying would like to discuss with you today the historical inevitability of the introduction of new regulations from several dimensions, and how industry practitioners should make strategic choices.

Part One: The logical evolution from traditional colonization to new

financial colonization

1.1 The resource logic of traditional colonization

The core of the traditional colonial era lies in the plunder of resources through military power and territorial possession. The British controlled India's cotton and tea through the East India Company, and Spain plundered gold from Latin America. These are typical examples of wealth transfer through direct possession of resources.

1.2 Modern model of financial colonization

Modern colonization takes economic rules as the core and realizes wealth transfer through capital flow and tax control. The U.S. Foreign Account Tax Compliance Act (FATCA) is an important manifestation of this logic. It requires global financial institutions to disclose asset information of U.S. citizens and forces other countries to participate in U.S. tax governance. The new DeFi tax regulations are the continuation of this model in the field of digital assets. Its core is to use technical means and rules to force the transparency of global capital, obtain more tax revenue for the United States, and at the same time strengthen its control over the global economy.

Part Two: America’s Neocolonial Tools

2.1 Tax rules: from FATCA to new DeFi regulations

Tax rules were the foundation of America's neocolonial model. FATCA forces global financial institutions to disclose asset information of U.S. citizens, setting a precedent for the weaponization of taxation. The new DeFi tax regulations further continue this logic and expand the scope of the United States’ control over the digital economy by requiring DeFi platforms to collect and report users’ transaction data. With the implementation of this rule, the United States will obtain more accurate capital flow data around the world, thereby further strengthening its control over the global economy.

**2.2 The combination of technology and the US dollar: the dominance of

stablecoins**

In the US$200 billion stablecoin market, US dollar stablecoins account for more than 95%, and the anchor assets behind them are mainly US Treasury bonds and US dollar reserves. U.S. dollar stablecoins represented by USDT and USDC, through their application in the global payment system, not only consolidate the global status of the U.S. dollar, but also lock more international capital into the U.S. financial system. This is a new form of dollar hegemony in the digital economy era.

**2.3 Attractiveness of financial products: Bitcoin ETFs and trust

products**

The Bitcoin ETFs and trust products launched by Wall Street giants such as BlackRock have attracted a large amount of international capital to flow into the US market through legalization and institutionalization. These financial products not only provide greater enforcement space for U.S. tax rules, but also further integrate global investors into the U.S. economic ecology. The current market size is US$100 billion.

2.4 Real-life asset tokenization (RWA)

The tokenization of real assets is becoming an important trend in the DeFi field. According to Aiying, the scale of tokenization of U.S. Treasury bonds has reached US$4 billion. This model improves the liquidity of traditional assets through blockchain technology, while also creating new dominance for the United States in the global capital market. By controlling the RWA ecosystem, the United States can further promote the global circulation of national debt.

Part 3: Economy and Finance—Deficit Pressure and Tax Fairness

3.1 US deficit crisis and tax loopholes

America’s federal deficit has never been more concerning. In fiscal year 2023, the deficit is close to $1.7 trillion, and post-pandemic fiscal stimulus and infrastructure investment have exacerbated this burden. At the same time, the global market value of the cryptocurrency market once exceeded 3 trillion US dollars, but most of it is outside the tax system. This is obviously intolerable for a modern country that relies on tax support.

Taxation is the cornerstone of state power. Historically, the United States has always sought to expand its tax base under deficit pressure. The regulatory reform of hedge funds in the 1980s is a good example of filling the fiscal gap by expanding the coverage of capital gains tax. Now, cryptocurrencies have become the latest target.

3.2 Financial sovereignty and the defense of the US dollar

But it's not just a tax issue. The rise of DeFi and stablecoins has challenged the dominance of the US dollar in the global payment system. Although stablecoins are an extension of the U.S. dollar and create a parallel "private currency" system by anchoring to the U.S. dollar, they also bypass the control of the Federal Reserve and traditional banks. The U.S. government realizes that this decentralized form of currency may pose a long-term threat to its financial sovereignty.

Through tax regulation, the United States not only intends to obtain financial benefits, but also attempts to re-establish its control over capital flows and defend the hegemony of the US dollar.

Part 4: Industry Perspective—Practitioners’ Choices and Tradeoffs

4.1 Assessment of the importance of the US market

As a practitioner of DeFi projects, the first step is to rationally evaluate the strategic value of the US market to the business. If the majority of a platform's trading volume and user base comes from the U.S. market, exiting the U.S. could mean huge losses. And if the U.S. market share is not high, complete withdrawal becomes a feasible option.

4.2 Three major coping strategies

Partial compliance: a compromise path

• Establish a US subsidiary (such as Uniswap.US) to focus on meeting the compliance needs of US users.
• Separate the protocol from the front end and reduce legal risks through DAO or other community management methods.
• Introduce a KYC mechanism and only report necessary information to US users.

Complete Exit: Focus on Global Markets

• Implement geo-blocking to restrict access to US users by IP.
• Concentrate resources on markets that are more friendly to cryptocurrency such as Asia Pacific, the Middle East, and Europe.

Complete decentralization: persistence of technology and concepts

• Abandon front-end services and completely shift the platform to protocol autonomy.
• Develop trustless compliance tools (such as on-chain tax reporting systems) to technically circumvent regulation.

Part 5: More profound thinking—the future game between regulation and

freedom

5.1 Evolution and long-term trends of the bill

In the short term, industry may litigate to delay implementation of the rules. But in the long term, the compliance trend is difficult to reverse. Regulation will polarize the DeFi industry: at one end are large platforms that are fully compliant, and at the other end are small decentralized projects that choose to operate in secret.

The United States may also adjust its policies under the pressure of global competition. If other countries (such as Singapore, the United Arab Emirates) adopt looser regulations on cryptocurrencies, the United States may loosen certain restrictions to attract innovators.

5.2 Philosophical reflections on freedom and control

The core of DeFi is freedom, while the core of government is control. This game has no end. Perhaps the future encryption industry will exist in a form of "compliant decentralization": technological innovation and regulatory compromise coexist, and privacy protection and transparency alternately advance.

Aiying's conclusion: historical necessity and industry choice

This bill is not an isolated incident, but an inevitable result of the logical development of American politics, economy, and culture. For the DeFi industry, this is a challenge and an opportunity for transformation. At this historical node, how to balance compliance and innovation, protect freedom and bear responsibility are questions that every practitioner must answer.

The future of the encryption industry depends not only on the advancement of technology, but also on how it finds its position between freedom and rules.