In a major test of the crypto industry’s growing clout in an increasingly friendly US Congress, a broad coalition is calling on lawmakers to flex their oversight authority and erase a controversial tax rule aimed at decentralized finance (DeFi) brokers. The high-stakes effort, spearheaded by the influential Blockchain Association, is uniting the sector’s diverse players around a common cause – fighting what they see as regulatory overreach threatening the future of crypto innovation in America.
Crypto’s United Front Against Controversial IRS Rule
The Blockchain Association has marshaled an impressive alliance of 75 crypto heavyweights, including industry titans like Coinbase, a16z, Paradigm, Kraken, Uniswap and Anchorage Digital, to sign onto a forceful letter urging Congress to quash the IRS’s DeFi broker reporting requirements finalized in the waning days of the Biden administration. The controversial policy, the group argues, demonstrates a fundamental misunderstanding of the technology it seeks to regulate and blatantly ignores legislative intent.
The DeFi broker rule, finalized in the waning days of the Biden administration, represents regulatory overreach that fundamentally misunderstands the technology it attempts to regulate and ignores Congress’s intent.
– Blockchain Association-led industry letter
The united front contends that saddling American DeFi platforms with onerous information collecting and reporting obligations not faced by their overseas rivals servicing US customers could prove catastrophic. “This unique burden on American companies alone could cripple DeFi innovation in this country altogether,” the letter warns starkly.
Congressional Review Act: A Powerful Tool
The industry coalition sees a clear path forward in the form of the Congressional Review Act (CRA), a legislative weapon that allows Congress to overturn recently enacted federal regulations. Senator Ted Cruz, an influential Texas Republican, fired the opening salvo last week by introducing a resolution to nullify the IRS’s DeFi rule through the CRA process.
While the CRA can be a forceful tool for reining in agency overreach, it comes with a catch. Any regulatory issue reversed via this method is permanently off-limits, barring the introduction of any substantially similar rule in the future. This could tie policymakers’ hands in developing more nuanced, pro-innovation DeFi regulations down the line.
Industry Support Pours In
Beyond the Blockchain Association’s powerhouse letter, other prominent crypto advocacy groups are rallying behind the CRA effort. The DeFi Education Fund expressed their “thrill” at seeing momentum build against what they slammed as an “unworkable, unconstitutional” rule.
The high-profile campaign to overturn the controversial IRS policy may prove an early test of the crypto industry’s elevated influence in a markedly more receptive Congress swept into power in the 2024 elections. However, with pressing issues like the federal budget looming large, the sector may need to work overtime to keep their priorities at the forefront of the legislative agenda.
The Path Forward
For the CRA resolution to reach President Trump’s desk, it will need to secure majority support in both chambers of Congress. If successful, the crypto industry will notch a significant victory in beating back a rule they paint as an existential threat to American DeFi innovation.
However, even if the CRA effort falters, the mere act of unifying around this cause and flexing their lobbying muscles sends a clear signal that the crypto sector will not sit quietly in the face of perceived regulatory overreach. As the blockchain landscape continues to mature and intersect with legacy finance and policy structures, these battles will only intensify, shaping the trajectory of cryptocurrency’s mainstream evolution.
One thing is certain: with the crypto industry finding its political footing and a new balance of power in Washington, the tug-of-war over the technology’s regulatory future is entering a critical new phase. The outcome of this DeFi broker rule fight could set the tone for years to come.
