Challenging DeFi Rule for Cryptocurrencies Is Canceled in the US: Trump has the last word! - Coin Newsletter

The U.S. Senate voted 70-28 to repeal a controversial cryptocurrency tax rule that went into effect just weeks before the Trump administration took office.

The Senate approved the cancellation of the Internal Revenue Service (IRS) rule late Wednesday. Ron Hammond, the director of government relations for the Blockchain Association, stated in a post on X platform before the vote, "After this law passes today, it will be the first crypto law sent to President Trump for signing." The White House's Crypto A.I. and Crypto Czar David Sacks indicated that Trump's senior advisors plan to propose signing this regulation.

In the final days of the Biden administration, Senator Ted Cruz and Rep. Mike Carey presented a joint proposal to repeal this rule, which went into effect in December. The rule required certain "participants in the decentralized finance (DeFi) sector" to operate as traditional securities brokers.

This regulation required participants to collect and report user transaction data. It also anticipated Form 1099 tax declaration regulations requiring users to report non-employment income such as gambling winnings, rental income, and royalties. According to the U.S. Department of the Treasury, this rule was applied to "front-end service providers" and targeted websites that provide direct access to the decentralized protocol.

The Trump administration stated in a statement on March 4 that the rule was "a midnight regulation issued in the final days of the previous administration", pointing out that the regulation raised privacy concerns.

Negative reactions came from leading names in the crypto world.

Crypto sector leaders strongly opposed the rule coming into effect. DeFi Education Fund and other groups sued the IRS, stating that this regulation would "push this new technology abroad."

Amanda Tuminelli, executive director of the DeFi Education Fund, called the Senate's decision a "critical step" to protect U.S. innovation and allow developers to develop technology without facing uncertain and extreme regulations.

Some Democrats are opposing the passage of this regulation and arguing that Republicans aim to weaken the IRS.

Representative Richard Neal stated in a statement made in February, "It is contradictory for a party that has consistently left the IRS with a funding shortfall to now try to weaken the IRS."