Defi "Broker Rule" ripped up by US Congress and Trump

In a significant development for the cryptocurrency industry, President Donald Trump signed legislation yesterday, overturning an Internal Revenue Service (IRS) rule that had expanded the definition of "broker" dramatically to include decentralized cryptocurrency exchanges and self-custodial wallet providers.

Background of the Rule

The controversial rule originated from the US $1 trillion bipartisan Infrastructure Investment and Jobs Act of 2021, which expanded broker reporting requirements under Sections 6045 and 6045A to include digital assets. In the final weeks of the Biden administration, the IRS issued a revised rule (T.D. 10021) that specifically targeted decentralized finance (DeFi) platforms by classifying them as "digital asset middlemen."

The rule would have required these entities to collect and report revenue and customer information, including names, addresses, and transaction details, similar to traditional securities brokers. This reporting framework was designed as a revenue offset, with the Joint Committee on Taxation estimating it would raise nearly US $28 billion over ten years.

Industry Opposition

The cryptocurrency industry strongly opposed these regulations, arguing they were fundamentally unworkable for DeFi platforms, which by design don't act as intermediaries and often lack visibility into user identities and simply could not report transactions when operating in a decentralised way.

Industry associations including the Blockchain Association, Texas Blockchain Council, and DeFi Education Fund filed a lawsuit in December 2024, seeking an injunction against the rule. Critics maintained that the Treasury Department had effectively changed the definition of "broker" far beyond what Congress had intended in the original legislation.

Congressional and Executive Action

Both the House of Representatives and Senate voted in March 2025 to nullify the

revision through the Congressional Review Act, which allows Congress to reverse new federal rules with a simple majority.

President Trump, who had campaigned as a "crypto president" and promised to promote digital asset adoption and fire the former SEC Chair, signed the bill into law on 10 April, finalizing the nullification of the expanded broker definition. This action aligns with earlier executive orders from the Trump administration that created a cryptocurrency working group and established a federal stockpile of bitcoin.

After attending the signing of the new law, the sponsor of the bill, Mike Carey (R) said:

The DeFi Broker Rule needlessly hindered ... innovation, infringed on ... privacy... and was set to overwhelm the IRS with an overflow of new filings that it doesn’t have the infrastructure to handle during tax season. By repealing this misguided rule, ... the IRS [has] an opportunity to return its focus to the duties and obligations it already owes ... instead of creating a new series of bureaucratic hurdles

The President of the Blockchain Association, Kristin Smith, said:

This rule promised an end to the United States crypto industry – it was a sledgehammer to the engine of American innovation. On behalf of our members, and the entire industry, we’re grateful to have this harmful rule off the books for good.

Impact and Future Outlook

The nullification represents a significant victory for the cryptocurrency industry, particularly for DeFi developers, self-custodial wallet providers, and other non-custodial entities that would have faced substantial compliance challenges under the expanded definition.

The reversal of this rule signals a more favorable regulatory environment for cryptocurrency innovation under the current administration, though broader questions about appropriate taxation and reporting frameworks for digital assets remain to be addressed.

Industry participants can now operate without the immediate threat of these expanded reporting requirements, which had been scheduled to take effect for transactions occurring on or after 1 January 2027.

By Michael Bacina and Steven Pettigrove