Controversial DeFi Broker Rule Officially Scrapped
The IRS has formally eliminated a widely opposed rule that would have forced decentralized finance (DeFi) platforms to comply with traditional broker reporting requirements. This move marks a major win for crypto advocates, privacy defenders, and the DeFi community at large.
The “DeFi broker rule”, introduced during the final stretch of President Biden’s administration, was repealed by a bipartisan resolution signed into law by President Donald Trump in April, making it the first crypto-related bill ever signed by a U.S. president.
On Thursday, the Treasury Department confirmed it had officially removed the rule from the U.S. tax code, implementing the legislative repeal through a bureaucratic action finalized on June 17—but only now made public.
Why the Rule Was So Problematic for DeFi
When first proposed in 2023, the rule sparked fierce backlash. It sought to define DeFi protocols—automated smart contracts often lacking any central operator—as "brokers". This would have forced them to collect and report KYC (know-your-customer) information, just like Charles Schwab or Fidelity.
But as DeFi supporters quickly pointed out, DeFi’s very design makes that impossible. Protocols can’t gather user data because they don’t have humans operating them, and even if they did, mandating identity collection would have destroyed the privacy that gives DeFi its appeal.
Crypto advocates warned that the rule would “cripple innovation” and “criminalize open-source code,” while subjecting user transaction histories to mass exposure via blockchain traceability.
Back to the Old Definition—For Now
With the IRS’ latest announcement, the definition of a broker now reverts to its pre-2023 state, which excludes decentralized platforms. This means DeFi projects are no longer under threat of being treated like custodial trading platforms for tax-reporting purposes.
The IRS’ move follows months of political pressure and industry lobbying, emphasizing how deeply integrated DeFi has become in U.S. crypto policy debates.
Trump Becomes First President to Sign Crypto Bill
By signing the resolution into law in April, Donald Trump not only rolled back an unpopular rule—he also made history as the first American president to codify crypto-specific legislation.
The repeal signals a possible broader shift in U.S. crypto policy, especially as the 2025 election looms, with crypto regulation shaping up to be a key battleground issue.
What Comes Next?
While this is a clear win for DeFi, the fight is far from over. The Treasury and IRS are still expected to develop updated tax reporting frameworks for digital assets, and there’s no guarantee future administrations won’t try to reintroduce similar rules.
For now, though, the DeFi world can breathe easier—its core principles of privacy, autonomy, and decentralization are safe… at least temporarily.
