Congress has dealt a stinging blow to the IRS’s controversial DeFi regulations. In a surprisingly unified move, the House voted 292-132 to overturn the agency’s December 2024 rule that would have forced decentralized finance platforms to report user transactions. This follows a decisive 70-27 Senate vote earlier this month. Turns out, politicians can agree on something after all.
In a rare display of bipartisan unity, lawmakers stomped the IRS’s overreaching DeFi rules back to the stone age.
The rule was ambitious, to put it kindly. It classified DeFi front-end operators as brokers and mandated KYC requirements that many experts said were technically impossible to implement. Seriously, how do you require ID verification from code running on thousands of computers worldwide? The IRS seemed to miss that memo.
Critics hammered the regulation as a fundamental misunderstanding of DeFi technology. The compliance costs? A whopping $260 billion. No wonder 76 Democrats crossed party lines to join Republicans. Republican Representative Mike Carey introduced the repeal motion that gained such widespread support. Nothing unites Washington like recognizing a bad idea when they see one.
The crypto community is, predictably, ecstatic. This vote represents a rare defeat for the anti-crypto regulatory agenda that’s been gaining steam. Industry leaders view it as a vital victory for maintaining the decentralized nature of DeFi protocols and preserving user privacy features. DeFi systems operate using smart contracts that automatically enforce agreements without intermediaries like banks.
The resolution now heads to President Trump’s desk, where a signature seems likely. For the DeFi industry, this means relief from reporting requirements that threatened to drive innovation overseas. Many platforms can now breathe easier, knowing they won’t need to somehow identify users of truly decentralized protocols. Unlike traditional banks that offer FDIC insurance protecting up to $250,000, DeFi users bear all security risks associated with their investments.
Regulatory implications are significant. This rejection signals a potential shift toward more nuanced approaches to crypto regulation, possibly leveraging blockchain-native compliance solutions rather than forcing traditional frameworks onto new technology.
What’s next? While this rule is effectively dead, the conversation about appropriate DeFi regulation continues. The industry is pushing for workable frameworks that balance innovation with necessary oversight. For now, though, score one for the crypto world. The IRS will have to go back to the drawing board.
