Blockchain Industry Urges Congress to Repeal IRS Regulation

The Blockchain Association, representing 76 cryptocurrency firms, has urged Congress to support Senator Ted Cruz in repealing the Internal Revenue Service’s (IRS) decentralized finance (DeFi) broker rule. The association argues that the rule threatens US crypto innovation and places an undue burden on blockchain companies.

On 19 February, the Blockchain Association sent a letter to key congressional leaders, including Senate Majority Leader John Thune, Senate Minority Leader Chuck Schumer, House Speaker Mike Johnson, and House Minority Leader Hakeem Jeffries. The letter calls for the repeal of an anti-crypto regulation finalised during the closing days of President Joe Biden’s administration.

Major crypto organisations, including 0x Labs, a16z Crypto (Andreessen Horowitz’s crypto division), Aptos Labs, Crypto.com, Grayscale, Dapper Labs, and Ava Labs, signed the letter in opposition to the new regulation.

Blockchain Firms Criticise Biden-Era IRS Rule

The letter supports Cruz’s Congressional Review Act (CRA) resolution, S.J.Res. 3, which aims to overturn a regulatory rule that broadens the definition of a “broker” under US law. The expansion would classify software providers that facilitate access to DeFi protocols as brokers, subjecting them to the same reporting requirements as traditional financial brokers.

Set to take effect in 2027, the rule would require DeFi platforms to comply with tax reporting obligations similar to those of conventional financial institutions. The IRS estimated on 27 December 2024 that the rule would impact up to 875 DeFi brokers operating in the US.

Industry Warns of Stifled Innovation

The Blockchain Association argues that the rule imposes unjustified burdens on American DeFi companies, endangers innovation in the digital asset sector, and weakens US competitiveness in financial technology.

“Under the rule, software companies that never take custody or control of users’ assets will be required to radically rebuild their services in order to unnecessarily collect and then report to the government the personal identifying information and transaction details of potentially tens of millions of American users,” the association stated.

Beyond compliance challenges, industry leaders believe the regulation unfairly targets US-based crypto firms and could “cripple DeFi innovation” by imposing stringent reporting obligations.

The Blockchain Association contends that the rule was rushed through as part of a “midnight rulemaking” process, bypassing proper legislative scrutiny. The association insists that Congress, not regulatory agencies, should make decisions with such significant economic and technological consequences.

The letter urges lawmakers to vote in favour of Cruz’s CRA resolution, arguing that repealing the rule would support DeFi innovation, promote economic growth, create jobs, and enhance financial inclusion in the US.