A US House Committee under the Trump administration scored a first after voting to roll back the implementation of a controversial IRS DeFi tax rule passed during President Joe Biden’s administration’s final day.
According to a report on Reuters, the US House Ways and Means Committee voted 26-16 on Wednesday in support of a motion that was moved by Rep. Mike Carey, R-Ohio, to reverse the IRS rule that was finalized late last year, who opined that the rule would “overwhelm” the IRS with forms.
Force DeFi Platforms to Have Keep Records
Following the vote that proposed overturning the controversial IRS DeFi tax rule that required “custodial brokers” to collect and forward all user data to the Internal Revenue Service, its fate now remains in the hands of the full House of Representatives. Speaking during the hearing, Rep. Carey stated:
“We must pass this resolution to avoid this nightmare for American taxpayers and the IRS while ensuring that the United States is, in fact, in a position to lead the world in innovation with digital assets and the crypto sector.”
The proposed IRS DeFi tax rule sought to extend traditional broker reporting requirements to decentralized finance platforms. The rule would require the operators to track and report user transactions to the taxman. Unsatisfied with the proposal, the Blockchain Association moved to court to challenge the rule, stating that it would burden software developers who created decentralized trading services unnecessarily.
A Change of Heart in the US Administration
Last December, the Internal Revenue Service approved a system associated with the IRS DeFi tax rule that would have forced DeFi platforms to record “the name and address of each customer.” However, it’s an open secret that, in most instances, no centralized service providers interface directly with users — making it what some have called an “unsquarable circle.” All the prominent names within the crypto circles signed onto a Blockchain Association letter last week calling for eliminating this rule. Rep Mike Carey further stated:
“We must pass this resolution to avoid this nightmare for American taxpayers and the IRS.”
According to the association’s argument, enforcing the new IRS DeFi tax rule would restrict entrepreneurship and stifle innovation within the cryptocurrency sector. The move by the House Committee to challenge the regulation highlights the change of heart within the US administration towards the crypto space, with many already predicting the ultimate overturning of the rule.
A Win for the DeFi Sector
If the full House of Congress upholds the proposal, the decision would mark a significant win for the DeFi sector as it would withhold its decentralized model. Commenting on the development, DeFi Education fund CEO Miller Whitehouse-Levine said in a statement:
“The DeFi Education Fund applauds the House Ways and Means Committee members who voted for moving the CRA to the House floor, recognizing the need to push back against unlawful and unconstitutional overreach by the Treasury and IRS and to protect Americans’ freedom of choice in how they transact […] Members of the full House and Senate will now get to vote on the CRA.”
Conclusion
The decision by the House committee to propose repealing the IRS DeFi tax rule can be seen as a positive sign for the growth of the cryptocurrency sector within the United States. However, the final decision depends on the resolution of Congress and the President’s signature. Considering the pro-crypto stance of President Donald Trump and a majority of the members of Congress, there’s an increasing likelihood that the rule will be fully repealed.
Advertisement Banner
Frequently Asked Questions (FAQs)
What was the controversial DeFi tax regulation?
The Regulations require DeFi service providers to interface with users, collect certain information from users, and report digital asset transactions to the IRS.
What are the new IRS rules for crypto?
Taxpayers have always been obligated to include gains from sales or exchanges of digital assets in their income. However, the new rules require brokers—not digital asset holders—to do the reporting.
Does the IRS track DeFi?
In the new regulations, the IRS further specified that DeFi participants would be treated as brokers and required to report to the IRS and provide copies to their customers.
How is DeFi regulated in the US?
The Commodity Futures Trading Commission (CFTC) and the SEC are the central regulatory bodies overseeing DeFi activities.
Appendix: Glossary to Key Terms
DeFi: A system that allows users to perform financial transactions without the need for intermediaries like banks.
IRS: A US government agency responsible for collecting federal taxes and enforcing tax laws.
Custodial broker: An organization that manages and safeguards your cryptocurrency assets.
The CFTC: An independent US government agency that regulates derivatives markets, including futures and options on commodities like virtual currencies.
References
The price predictions and financial analysis presented on this website are for informational purposes only and do not constitute financial, investment, or trading advice. While we strive to provide accurate and up-to-date information, the volatile nature of cryptocurrency markets means that prices can fluctuate significantly and unpredictably.
You should conduct your own research and consult with a qualified financial advisor before making any investment decisions. The Bit Journal does not guarantee the accuracy, completeness, or reliability of any information provided in the price predictions, and we will not be held liable for any losses incurred as a result of relying on this information.
Investing in cryptocurrencies carries risks, including the risk of significant losses. Always invest responsibly and within your means.
For advertising inquiries, please email . [email protected] or Telegram
