US Lawmakers Introduce Legislation to Challenge IRS Broker Rules Impacting DeFi
US lawmakers are gearing up to challenge the Internal Revenue Service’s (IRS) broker rules that require decentralized finance (DeFi) participants to report user data to the agency. This move comes as Republican Senator Ted Cruz leads efforts to introduce a Congressional Review Act (CRA) aimed at repealing the controversial rule.
What the CRA Involves
The CRA, if passed with a simple majority in both chambers, would revoke the IRS broker rule that expands the definition of a ‘broker’ to include DeFi developers. Supporters of the CRA argue that the current rule does not align with the unique characteristics of DeFi.
Details of the IRS Broker Rule
The IRS broker rule, finalized in the previous year, imposes new tax reporting requirements on entities handling digital assets. It categorizes brokers, including DeFi front-ends, as responsible for monitoring user activity, reporting transactions, and enforcing compliance measures. The rule also mandates DeFi platforms to implement Know Your Customer (KYC) processes, covering all digital assets like non-fungible tokens (NFTs) and stablecoins.
Reactions to the Rule
The White House supported the IRS broker rule, while critics like Peter Van Valkenburgh, executive director of Coin Center, expressed concerns. Valkenburgh criticized the rule for treating software developers and infrastructure providers as brokers, which he believes compromises privacy rights and hinders technological innovation.
Implications of the Vote
Van Valkenburgh emphasized that the outcome of the upcoming vote will indicate the US government’s stance on digital asset regulation in the future. This vote serves as a significant test of whether the new Congress will adopt a more crypto-friendly approach.
Alignment with Pro-Crypto Sentiments
Revoking the IRS broker rule would align with the pro-crypto stance of the previous administration and signal the growing influence of pro-crypto lawmakers in shaping digital asset regulations.
