Historic Move for Cryptocurrency Legislation
In a historic move for the cryptocurrency landscape, President Donald Trump has enacted his inaugural bill related to digital currencies, effectively nullifying a contentious IRS regulation established during the Biden administration. This legislation marks a significant milestone as it is not only Trump’s first foray into crypto legislation but also the initial crypto-related law signed by any U.S. president to date.
Overturning the IRS’s DeFi Broker Rule
The newly signed bill overturns the IRS’s DeFi broker rule, which was put forth in 2023 and aimed to impose traditional tax reporting requirements on decentralized finance (DeFi) platforms. Representative Mike Carey, a Republican from Ohio who witnessed the bill’s signing, emphasized that this repeal allows the IRS to redirect its priorities back to serving American taxpayers more effectively. He criticized the previous rule for:
- Stifling innovation in the DeFi sector
- Infringing on individual privacy
- Posing a logistical nightmare for the IRS
These logistical issues included demanding extensive new filings that the agency was unprepared to manage during busy tax seasons.
Bipartisan Support and Industry Pushback
The repeal gained substantial bipartisan backing in both chambers of Congress last month, signaling a notable shift among some Democrats willing to challenge the former administration’s regulatory policies just months after leaving office. Industry advocates were quick to voice their opposition to the IRS rule upon its introduction, warning that it threatened to crush the burgeoning DeFi market in the United States.
Critics pointed out that DeFi protocols operate through automated coding and would struggle to meet regulatory standards created for traditional financial institutions. Despite the outcry from the crypto community, the IRS finalized its rule towards the end of Biden’s presidency, drawing ire from pro-crypto lawmakers and industry stakeholders.
Response from the Trump Administration
In response, the Trump administration endorsed the bill last month, with White House officials, including crypto and AI advisor David Sacks, describing the IRS’s DeFi rule as a “midnight regulation.” Sacks argued that the regulation would curtail American innovation and raise severe privacy concerns regarding the handling of taxpayer information.
Celebrating a Pivotal Moment
Following the bill’s signing, leaders within the cryptocurrency policy space celebrated this legislative achievement as a pivotal moment. Amanda Tuminelli, the Executive Director of the DeFi Education Fund, remarked that this signified a transformative change in the American regulatory stance towards digital assets. Tuminelli stated,
“Today, the U.S. made a crucial step forward with a forward-thinking approach to digital assets following President Trump’s signature.”
