In a stunning rebuke to tax authorities, the Senate crushed an IRS plan targeting DeFi applications with a decisive 70-27 vote on March 4, 2025. The resolution, introduced by Senator Ted Cruz, garnered surprising bipartisan support with 18 Democrats crossing party lines. So much for the IRS’s grand scheme.
The controversial rule, rolled out in December 2024, attempted to label decentralized finance platforms as “brokers,” forcing them to collect and report user data and transaction details. Nice try, IRS. Critics immediately blasted the proposal as technologically impossible for DeFi protocols to implement.
“Unworkable in practice,” declared Centrifuge’s counsel. The Blockchain Association, Coin Center, and DeFi Education Fund all celebrated the Senate’s decision. Their main argument? You can’t force code to file paperwork.
Code doesn’t fill out forms or collect personal data. Lawmakers finally recognized this digital reality.
The rule faced fierce opposition for practical reasons. DeFi platforms simply cannot comply—they’re code, not companies. Critics warned the regulation would threaten user privacy, stifle innovation, exceed IRS authority, and drive development overseas. The peer-to-peer transactions enabled by decentralized networks fundamentally eliminate the need for traditional intermediaries like brokers. America first? Not with regulations like these.
The fight isn’t over yet. The resolution now heads to the House of Representatives, where the Financial Services Committee has already approved a matching measure. A floor vote comes next. Senate Majority Leader John Thune emphasized the legislation’s importance for restoring financial freedom to Americans. Overturning the rule prevents the IRS from imposing similar restrictions on DeFi in the future. If passed, it lands on President Trump’s desk, where White House signals suggest he’ll sign it. The administration hasn’t exactly hidden its pro-crypto stance.
This vote matters beyond just one rule. It could influence upcoming stablecoin legislation and broader crypto regulation. The strong bipartisan support signals a major shift in Washington’s approach to digital assets. Lawmakers finally getting it? Maybe.
Some worry about the $3.9 billion in potential lost tax revenue over ten years and impacts on fighting financial crimes. Valid concerns. But the industry argues innovation can’t be sacrificed for impractical rules.
The crypto world now waits for the House vote and upcoming White House summit. One thing’s clear—Washington’s relationship with crypto is changing. Fast.
