Trump Reverses IRS Rule On DeFi Exchanges

U.S. President Donald Trump signed a bill on Thursday reversing a revised Internal Revenue Service (IRS) rule that expanded the definition of a “broker” to include decentralized cryptocurrency exchanges. This move comes after both the House of Representatives and the Senate passed a resolution to nullify the change under the Congressional Review Act, a mechanism allowing Congress to overturn new federal regulations with a simple majority.

The IRS rule, initially updated in December 2024 during the final weeks of the Biden administration, sought to clarify the tax reporting requirements for decentralized finance (DeFi) exchanges. The new guidelines, which would have required DeFi platforms to comply with existing tax reporting rules for brokers, sparked significant backlash within the cryptocurrency community.

Critics, including industry stakeholders, argued that the rule was unworkable for DeFi platforms, which do not act as intermediaries like centralized exchanges such as Coinbase and Kraken. Unlike these centralized platforms, which facilitate transactions between buyers and sellers, DeFi exchanges enable users to transact directly on blockchain networks without the need for a third-party intermediary. As a result, participants in the crypto industry contended that DeFi platforms lacked the ability to monitor or verify the identities of their users, making it nearly impossible to comply with the IRS’s new reporting requirements.

The IRS’s updated framework, which was part of the broader $1 trillion Infrastructure Investment and Jobs Act passed in 2021, was designed to crack down on crypto tax evasion by ensuring that digital asset brokers file forms to both the IRS and asset holders. These forms would aid in tax preparation and reporting for individuals engaging in cryptocurrency transactions.

Trump’s signing of the bill aligns with his ongoing support for the cryptocurrency industry. During his presidential campaign, he declared his intention to be a “crypto president” and promised to foster the adoption of digital assets. Early in his first term, Trump established a cryptocurrency working group to develop new regulations for digital assets and issued an executive order to create a federal stockpile of bitcoin.

The overturning of the IRS rule marks a significant victory for DeFi platforms and the broader cryptocurrency sector, which has been advocating for regulatory clarity and reforms that better align with the decentralized nature of blockchain-based financial systems.