House Panel Strikes Down IRS Crypt Rules – defi Just Wins a Big Win

House committees have abolished the IRS’ controversial “Defi Broker Rules,” curb innovation, overwhelm agents with filings, and alleged the disadvantages of US crypto users.

House Committee Blocks IRS Defi Broker Rules

The House Ways and Means Committee votes to abolish the Biden administration’s last-minute “Defi Broker Rules,” claiming that regulations curb innovation in digital assets and harm American leadership. The rules would have required Decentralized Financial (DEFI) providers to collect and report confidential taxpayer information, demand critics say it is unrealistic and damaging to the industry. Jason Smith, chairman of the Methods and Means Committee, accusing the IRS of exaggerating its authority, stated:

The IRS extended the directive from Congress in the Infrastructure Act of 2021, enacted a cryptocurrency agenda and unnecessarily regulated digital wallet providers.

The committee, which plays an important role in tax policy and economic oversight, exercised its authority to disapprove rules and effectively block implementation under the Congressional Review Act. For abolishment to take effect, the resolution must pass through Parliament and obtain final approval. After clearing the Methods and Means Committee, it will be moved to the House of Representatives for votes. If approved, it advances to the Senate. If both rooms pass it, the resolution will be sent to President Donald Trump, who can sign it into law and formally repeal the rules.

Regulation critics, including former IRS commissioners, warned that “overwhelming agencies and having little value in effective and efficient tax management.” The IRS itself estimated that the rules would generate at least 8 billion new submissions per year, creating a massive bureaucratic burden.

Unlike centralized cryptocurrency exchanges, Defi brokers don’t collect the information they need to comply with the rules, making them actually unenforceable. Smith highlighted the inequality of the rules, saying:

The winner of this last minute rule is a foreign digital asset company that is exempt from the burdensome requirements. One in four Americans who own cryptocurrency have one in them.

The committee ultimately voted 26-16 to support the repeal of the measure. The rejection of the Defi Broker rule shows strong Congressional opposition to the excessive regulatory burden on digital assets. The move also reflects broader debate about how cryptocurrencies should be regulated in the US, with lawmakers splitting into balancing surveillance and innovation. By repealing this rule, the committee cleared the path to a potential new approach to defi regulations that better aligns with the realities of decentralized financials.