Congress Revokes Crypto Broker Reporting Rules, Boosts DeFi Industry
The US Treasury Department has officially revoked the crypto broker reporting rules following a Congressional vote. This decision, which came after a vote by Congress to revoke the rules under the Congressional Review Act, marks a significant victory for the decentralized finance (DeFi) industry. The regulation, titled “Gross Proceeds Reporting by Brokers that Regularly Provide Services Effectuating Digital Asset Sales,” was initially published on December 30, 2024, and was set to require certain DeFi participants to file information returns as brokers starting February 28, 2025.
Under Public Law 119-5 and the Congressional Review Act, the final rule has been rendered null and void, as if it had never taken effect. The Treasury is now removing the rule from the Code of Federal Regulations and reverting to the previous text, which excluded entities solely engaged in validating distributed ledger transactions or selling hardware for private key control from broker reporting requirements.
Republicans in Congress successfully challenged the Biden-era rule that would have classified DeFi platforms as brokers, requiring extensive data collection and reporting obligations. The Treasury had estimated that billions in crypto-related taxes were going uncollected annually, but industry advocates argued that the requirements were technically impossible for decentralized platforms to implement. The regulation faced widespread criticism for misunderstanding decentralized technology and potentially driving innovation overseas, prompting legal challenges from various industry groups.
Senator Ted Cruz led the Congressional Review Act resolution alongside Representative Mike Carey, arguing that the rule represented government overreach that would stifle American cryptocurrency innovation. Cruz stated that the regulation “directly and immediately would harm American cryptocurrency innovation and drive development overseas.” The Joint Committee on Taxation estimated that repealing the rule could cost the government nearly $4 billion over ten years in lost tax revenue. Despite projected losses, lawmakers supporting repeal prioritized privacy, technical feasibility, and innovation over tax collection efficiency.
House Financial Services Committee Chairman French Hill also condemned the proposal as excessive government intervention, arguing that defining DeFi software providers as brokers would create costly reporting obligations for entities that never take custody of user funds. The regulation threatened to push American digital asset development overseas while undermining technological progress.
The White House Crypto Czar David Sacks supported the repeal effort, calling the regulation an “11th-hour attack on the crypto community by the Biden administration.” The administration positioned itself as strongly supportive of crypto industry concerns while establishing federal working groups on digital asset regulation. The successful repeal prevents the IRS from reintroducing similar proposals in the future, marking a significant victory for DeFi advocates.
The Treasury Department separately announced exemptions that will free banks and brokerage firms from reporting customers’ crypto holdings on financial statements, contingent upon demonstrating effective digital asset risk management capabilities. The SEC began issuing guidance clarifying that some crypto arrangements might not qualify as liabilities for reporting purposes. These regulatory relief measures came amid sustained Congressional pressure to revise the controversial SAB 121 accounting bulletin.
While the Senate voted to overturn SAB 121 in May with 60 senators supporting repeal, President Biden’s veto prevented the measure from taking effect. States continue advancing Bitcoin legislation independently of federal action, with 23 states introducing Bitcoin reserve bills and 35 proposals under consideration. In fact, following that, Kentucky Governor Andy Beshear signed the “Bitcoin Rights” bill into law.
Beyond the United States, Japan’s Senate has also recently approved legal amendments that give crypto brokerage firms increased operational freedom through new “intermediary business” categories, which come with reduced regulatory barriers. The legislation creates customer safeguards while promoting innovation, requiring the Prime Minister’s approval for crypto operators to hold assets domestically.
