In a landmark decision that has sent ripples through the cryptocurrency landscape, the IRS has officially removed the so-called “anti-DeFi broker rule” from the tax code. This move comes after President Trump signed a resolution repealing the rule in April—an action that garnered rare bipartisan support in both the House and Senate. This change, effective immediately, is being hailed as a significant victory for decentralized finance (DeFi) enthusiasts and industry stakeholders who have long argued that the rule was stifling innovation.
A Breath of Fresh Air for DeFi
The “anti-DeFi broker rule,” originally introduced as part of the infrastructure bill in 2021, imposed stringent reporting requirements on entities facilitating cryptocurrency transactions. Critics claimed the rule was overly broad, seemingly targeting software developers and node operators who had no direct control over user funds. With its repeal, the DeFi sector is breathing a collective sigh of relief, as market players anticipate a reinvigorated environment for innovation and growth.
“Removing the broker rule is a pivotal moment for the industry,” said crypto analyst Jane McFarland, who has been closely following regulatory developments. “It acknowledges that decentralization requires a different set of rules—ones that reflect the unique nature of blockchain technology.”
The repeal comes at a time when DeFi platforms like Lido and EigenLayer continue to attract significant attention for their innovative approaches to staking and security. This regulatory rollback could accelerate their adoption by reducing the fear of compliance burdens that previously loomed over the sector. As explored in our recent coverage of VC investments in DeFi, the sector has shown resilience and potential for growth even amidst regulatory challenges.
Implications for the Crypto Market
So, what does this mean for the broader crypto market? For starters, there’s an optimism that this policy change will spur increased investment and participation in DeFi projects. Without the looming threat of onerous tax reporting requirements, more developers might be encouraged to create new decentralized applications, potentially leading to a surge in user engagement.
“Investors are likely to view this as a green light,” noted blockchain consultant Marco Hernandez. “We’re already seeing a buzz of excitement, with markets reacting positively in the wake of the announcement.” This follows a pattern of robust investment activity, as detailed in our report on Paradigm’s recent funding round for Kuru Labs.
However, not everyone is convinced that the repeal alone will be enough to remove all barriers to DeFi’s growth. Some analysts caution that while the removal of the rule is a step in the right direction, the sector still faces challenges, including smart contract security risks and the potential for regulatory scrutiny in other areas.
Historical Context and Future Outlook
The controversy surrounding the anti-DeFi broker rule has its roots back in 2021, when the infrastructure bill sought to generate revenue by tightening tax compliance in the crypto industry. At the time, the rule was criticized for its vague language and potential to stifle technological progress. Fast forward to today, and its removal is seen as a correction of that misstep—one that could unlock new potential for the DeFi space.
Looking ahead, the crypto community is eager to see how the IRS’s latest move will influence other regulatory bodies. There’s a hope that this could set a precedent for more nuanced and industry-friendly regulations, fostering an environment where innovation isn’t hampered by outdated rules.
That said, questions remain: Will this shift in policy encourage other countries to follow suit? Can the DeFi sector capitalize on this newfound freedom to address its other pressing challenges, like ensuring user security and preventing fraud?
As the industry continues to evolve, the repeal of the anti-DeFi broker rule marks a significant milestone. It’s a reminder of the delicate balance regulators must strike between fostering innovation and protecting consumers—a balance that will be crucial as we move further into the digital age.
Source
This article is based on: IRS Formally Removes Anti-DeFi Broker Rule From Tax Code
Further Reading
Deepen your understanding with these related articles:
- US Senator Cynthia Lummis drafts standalone crypto tax bill
- Crypto Tax Proposal That Didn’t Make It to Trump’s Budget Bill Pushed on Its Own
- US SEC ‘Crypto Mom’ clarifies: ‘Tokenized securities are still securities’
Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
