U.S. Senators Move to Kill IRS Crypto Rule—DeFi and Wallets Face Regulatory Shakeup
U.S. Republican senators push to repeal IRS and CFPB regulations affecting digital assets, sparking debate over innovation, privacy, and consumer protection. The outcome could reshape the crypto sector's regulatory landscape.
In a notable legislative development, U.S. Republican senators are advocating for the repeal of two federal regulations impacting digital assets: the Internal Revenue Service’s (IRS) reporting requirements for decentralized finance (DeFi) and new rules from the Consumer Financial Protection Bureau (CFPB) concerning payment applications and digital wallets.
IRS Reporting Requirements for DeFi
The IRS rule, finalized in December 2022, broadened the definition of “brokers” to include entities facilitating digital asset transactions, such as decentralized exchanges and DeFi platforms.
The regulation mandates that these platforms report user transactions to enhance tax compliance within the rapidly expanding crypto sector. Critics argue that the rule places an undue burden on DeFi platforms, which could stifle innovation and force operations offshore.
However, they contend that the decentralized nature of these platforms makes compliance difficult, as no central entity exists to fulfill reporting obligations.
CFPB’s Oversight of Digital Payment Apps and Wallets
In parallel, the CFPB finalized a rule in November 2024, granting it the authority to supervise large nonbank companies offering digital funds transfer and payment wallet apps, including major tech firms like Apple and Google.
This regulation subjects these entities to federal oversight, aiming to protect consumers’ personal data, reduce fraud, and prevent illegal debanking. Opponents of the rule argue that it could hinder innovation and impose excessive regulatory burdens on tech companies, potentially slowing the progress of new financial technologies.
Legislative Actions and Industry Reactions
Late in February 2025, the House Ways and Means Committee voted 26 to 16 to advance a resolution seeking the repeal of the IRS’s DeFi broker rule. Senator Ted Cruz introduced a similar resolution in the Senate, stressing the need to protect taxpayers and prevent overwhelming the IRS.
However, this move follows previous efforts to adjust the regulatory framework for digital assets. For example, the U.S. Congress passed the Infrastructure Investment and Jobs Act in 2021, which expanded tax reporting requirements for cryptocurrency transactions. However, industry advocates have since lobbied for amendments, arguing that some definitions in the law are too broad and could unintentionally target non-custodial actors.
The push to repeal these regulations has prompted mixed reactions within the crypto community. Some stakeholders view these efforts as essential for promoting innovation and preventing regulatory overreach. Others, however, fear that repealing these rules could lead to increased fraud and weakened consumer protections.
User @pham_thuong97 expressed concern about the potential global effects, stating, “🇺🇸💡 Regulatory developments in the U.S. could have significant implications for digital asset markets.”
On the other hand, @TrulyADog humorously remarked, “IRS reporting requirements for DeFi? Sounds like someone’s trying to keep their crypto gains a secret. Good luck with that, senators. The blockchain remembers all.” This response underscores a belief among crypto advocates that blockchain’s transparency makes it difficult to hide transactions, regardless of regulatory changes.
