Lawmakers within the U.S. Home of Representatives superior a decision on Wednesday that goals to stop the Inner Income Service from imposing tax reporting necessities on decentralized finance, or DeFi, initiatives.
The chamber’s Methods and Means Committee, by a 26-16 vote, teed up the measure for a broader vote on the Home ground, the place pro-crypto Republicans maintain a slim majority. The joint decision seeks to stamp out an IRS tax regime for DeFi initiatives authorised in December.
Home Methods and Means Chair Jason Smith (R-MO) stated in an announcement on Wednesday that the IRS tax rule seeks to “unnecessarily regulate the providers of digital wallets.” He argued it will solely profit non-U.S. companies which can be exempt from the rule’s “burdensome requirements.”
The Methods and Means Committee simply handed H.J.Res. 25 – a decision that repeals an unfair and unworkable cryptocurrency rule that may hamper cryptocurrency holders and the IRS with further, burdensome paperwork. pic.twitter.com/HRJ1yWJSZA
— Methods and Means Committee (@WaysandMeansGOP) February 26, 2025
Underneath the just lately authorised rule, a modification to the IRS’ definition of “broker” requires DeFi initiatives to abide by the identical transaction reporting guidelines as bond and inventory brokers on Wall Road. The change additionally applies to centralized exchanges—or any crypto venture facilitating the switch of digital property that belong to a different individual.
The rule requires DeFi initiatives to ship customers a so-called Kind 1099 tax doc. That will successfully remind customers that crypto transactions are taxable whereas additionally lowering “inadvertent errors or noncompliance,” in response to a weblog submit from the U.S. Treasury Division—which additionally performed a job in formulating the rule.
Earlier than the decision will be finalized underneath the Congressional Evaluate Act with President Donald Trump’s signature, it additionally must be handed in Congress by a easy majority.
“America’s goal should be to prioritize innovation, and this rule is the opposite,” Sen. Ted Cruz (R-TX) stated in selling an identical decision that he unveiled within the Senate in January.
The Blockchain Affiliation was amongst many commerce teams that condemned the IRS tax rule because it gained momentum within the twilight of former President Joe Biden’s administration.
Concentrating on a nook of the digital property trade that seeks to create autonomous monetary providers by way of good contracts, the Blockchain Affiliation argued the IRS’ new tax rule could be unattainable to impose on DeFi initiatives.
“Any attempt to link wallet addresses to personal identities would create a serious and permanent privacy issue for those users,” the Blockchain Affiliation wrote, equating the measure to publishing bank card transactions on-line.
Edited by James Rubin
