In a landmark victory for the cryptocurrency industry, President Trump signed H.J. Res. 25 into law yesterday, overturning controversial IRS regulations that would have imposed extensive broker reporting requirements on decentralized finance (DeFi) platforms. The congressional action, which utilized the Congressional Review Act (CRA), effectively nullifies Treasury Decision (T.D.) 10021 and provides immediate relief for DeFi participants facing potential compliance burdens.
The repeal marks a significant moment in the ongoing tension between regulatory agencies and the rapidly evolving cryptocurrency sector, representing a rare instance where Congress has intervened to prevent the implementation of cryptocurrency-specific tax regulations.
Understanding the Overturned Regulations
The now-repealed T.D. 10021, published by the IRS on December 30, 2024, would have required certain DeFi participants to register as brokers and file Form 1099-DA reports documenting customer transactions and personal information. These regulations were scheduled to take effect on January 1, 2027, providing the industry with a two-year preparation period.
The regulations specifically targeted “trading front-end service providers” in the DeFi ecosystem—platforms and services that provide users with access to decentralized trading protocols. Under the proposed rules, these entities would have been required to collect customer identification information, track transaction details, and report gross proceeds from digital asset sales to the IRS.
Key aspects of the overturned regulations included:
- Broker Classification: DeFi front-end service providers would have been classified as brokers under IRS rules
- Information Reporting: Mandatory filing of Form 1099-DA for customer transactions over $600
- Customer Data Collection: Requirements to gather and maintain customer names, addresses, and transaction details
- Record Retention: Extensive documentation requirements spanning multiple years
The regulations represented the IRS’s most ambitious attempt to extend traditional financial reporting requirements into the decentralized finance ecosystem, which operates without traditional intermediaries or centralized control structures.
Congressional Intervention and Industry Response
The use of the Congressional Review Act to overturn these regulations demonstrates the cryptocurrency industry’s growing political influence and congressional concerns about regulatory overreach. H.J. Res. 25 passed both chambers of Congress with bipartisan support, reflecting widespread concerns about the practicality and appropriateness of applying traditional broker reporting requirements to decentralized systems.
“The repeal of these regulations represents a recognition by Congress that one-size-fits-all financial regulation doesn’t work for decentralized finance,” said Sarah Mitchell, senior policy counsel at the Blockchain Association. “DeFi protocols by their nature don’t have access to customer information in the way traditional brokers do, making compliance with these requirements technically impossible in many cases.”
The cryptocurrency industry rallied strongly against the proposed regulations, arguing that they would stifle innovation and potentially force DeFi platforms to relocate outside the United States. Industry groups including the Blockchain Association, Chamber of Digital Commerce, and DeFi Education Fund coordinated extensive lobbying efforts to educate congressional members about the technical impracticalities of the proposed requirements.
Implications for the DeFi Ecosystem
The immediate impact of the congressional action provides significant relief for DeFi platforms and developers who were facing potentially complex and costly compliance challenges. Without the broker reporting requirements, DeFi protocols can continue operating without implementing extensive customer identification and transaction monitoring systems.
Industry experts suggest the repeal will have several positive effects on the DeFi ecosystem:
Continued Innovation: DeFi developers can focus on building innovative financial products without navigating complex regulatory reporting requirements that may not align with decentralized architectures.
Competitive Advantage: U.S.-based DeFi platforms maintain competitiveness with international counterparts that operate under different regulatory frameworks.
User Privacy: DeFi users retain a degree of privacy that would have been compromised by extensive data collection and reporting requirements.
Reduced Compliance Costs: DeFi platforms avoid significant expenses associated with implementing broker reporting infrastructure and hiring compliance personnel.
Budget and Enforcement Considerations
The Congressional Budget Office estimated that repealing these regulations would increase the federal deficit by approximately $3.9 billion over the next decade, reflecting the IRS’s anticipated revenue losses from enhanced tax compliance through broker reporting. However, industry advocates argue that these estimates failed to account for the economic benefits of maintaining a competitive DeFi ecosystem in the United States.
“While the revenue projections are noteworthy, they don’t capture the full economic picture,” noted John Reed, policy director at the DeFi Education Fund. “A thriving DeFi ecosystem generates economic activity, creates jobs, and maintains U.S. leadership in financial technology innovation. These benefits must be weighed against projected revenue losses.”
Importantly, the repeal does not eliminate all cryptocurrency tax compliance obligations. Centralized exchanges and traditional crypto brokers remain subject to existing reporting requirements under separate regulations (T.D. 10000), which were not included in the congressional review action. The IRS also retains existing enforcement tools, including John Doe summonses and audit authority, to investigate cryptocurrency tax compliance.
What This Means for Crypto Investors and Users
For individual cryptocurrency users and investors, the repeal maintains the current status quo for tax compliance. cryptocurrency investors remain responsible for accurately reporting capital gains and losses on their tax returns, calculating fair market values for transactions, and maintaining appropriate records for tax purposes.
However, DeFi users will not receive 1099-DA forms from their trading platforms, meaning they must continue calculating and reporting tax obligations independently. Tax professionals emphasize that the absence of third-party reporting increases the importance of accurate personal record-keeping and professional tax advice.
“DeFi users need to be particularly diligent about their tax record-keeping,” warned Jennifer Martinez, CPA specializing in cryptocurrency taxation. “Without 1099 forms from trading platforms, taxpayers must maintain comprehensive records of their transactions, including dates, amounts, and fair market values. The responsibility for accurate reporting falls entirely on individual taxpayers.”
Future Regulatory Landscape
While the congressional action provides immediate relief, the cryptocurrency industry recognizes that regulatory clarity remains an ongoing challenge. The IRS and other regulatory agencies are likely to continue developing approaches to cryptocurrency taxation and compliance, potentially through new legislation or alternative regulatory frameworks.
Industry leaders are calling for collaborative approaches between regulators and the cryptocurrency industry to develop practical compliance solutions that respect the unique characteristics of decentralized systems while ensuring appropriate tax collection.
“The repeal of these regulations is not the end of the conversation about cryptocurrency regulation,” concluded Sarah Mitchell of the Blockchain Association. “Rather, it represents an opportunity for regulators and industry to work together to develop frameworks that both protect consumers and enable innovation. We’re committed to engaging constructively with policymakers to find solutions that work for everyone.”
As the cryptocurrency ecosystem continues to evolve, the balance between regulatory oversight and innovation preservation will remain a central theme. The congressional action on DeFi broker reporting requirements demonstrates that when industry concerns are well-articiated and technically grounded, policymakers are willing to reconsider regulatory approaches that may be ill-suited for emerging technologies.
This article reflects information available as of April 11, 2025. Regulatory developments and legislative actions may have evolved since publication.