Crypto Industry Fights Back: US Lawmakers Vote to Repeal Contentious IRS Rule

US lawmakers have taken a significant step towards repealing a contentious tax rule that has been criticized as unfair and overly burdensome for the cryptocurrency industry. On February 26, the House Ways and Means Committee voted 26 to 16 to pass a resolution aimed at overturning the so-called "DeFi broker rule," which was approved by the Internal Revenue Service (IRS) in December 2022.

The IRS regulation, set to take effect in 2027, would expand existing reporting requirements to include decentralized exchanges and mandate that brokers disclose gross proceeds from sales of cryptocurrencies, along with information regarding taxpayers involved in the transactions. Industry advocates argue that this rule is an "unlawful and unconstitutional overreach" that infringes upon Americans' freedom of choice in transactions.

If the resolution passes through the House, it will then move to the Senate. If approved there, it would be sent to the US President for either a veto or signature into law. The legislation, implemented during former President Joe Biden's final days in office, has been criticized for potentially stifling America's digital asset leadership and creating an unworkable regulatory burden.

Ways and Means Committee Chairman Jason Smith has been a vocal critic of the rule, stating that it is both unfair and unworkable. He argues that the IRS has stretched its directives from Congress to unnecessarily regulate digital wallet providers, benefiting foreign crypto firms exempt from the requirements at the expense of American cryptocurrency owners.

The change in leadership and the Republican Party's majority control of the US Senate and House have led to speculation that the US government might become the most pro-crypto in history. The new administration has already taken steps to support the crypto industry, such as the United States Securities and Exchange Commission ending multiple cases against crypto firms in February.