Crypto tax rule struck down by U.S. Senate bill heads to Trump’s desk

• The U.S. Senate voted 70-28 to repeal a controversial IRS rule imposing strict tax reporting on crypto and DeFi participants, sending the bill to Trump for approval.
• The rule, introduced in Biden’s final days, sought to classify DeFi providers as brokers, requiring them to report user trading data and issue tax forms.
• Industry leaders and advocacy groups opposed the measure, arguing it would stifle innovation and push blockchain development offshore.

The U.S. Senate voted 70-28 to repeal a contentious IRS rule that would have subjected some decentralized finance (DeFi) actors to strict reporting requirements. The resolution, which already passed the House, now goes to President Donald Trump, who is likely to sign it into law.

The rule, concluded in the final few weeks leading up to Trump’s inauguration, was introduced in the final moments of the Biden administration. It sought to classify certain DeFi service providers as traditional brokers for securities and would have forced them to report and collect user trading data. It would have forced them to file Form 1099 tax reports on non-employment income such as trading gains, casino winnings, and royalties.

Since the IRS rule was made public, it was met with strong opposition from business leaders. The DeFi Education Fund and various lobby groups sued the IRS on the premise that such actions would drive blockchain innovation outside the United States. The regulation was branded a “midnight rule” and an overreach in scope by critics who said it would be an intrusion into user privacy.

Amanda Tuminelli, DeFi Education Fund executive director, welcomed the Senate’s decision and described it as a “crucial step toward protecting U.S. innovation.” She thanked bipartisan lawmakers for recognizing the “severe and far-reaching effects” of the IRS policy.

Political Divide Over Crypto Regulation  

The effort to rescind it was spearheaded by Sen. Ted Cruz (R-Texas) and Rep. Mike Carey (R-Ohio) and had strong backing from Republican lawmakers. While there were Democratic proponents like Senate Minority Leader Chuck Schumer who voted for the rule’s reversal, there were others who complained the move was part of a broader effort to hinder the IRS’s ability to regulate financial markets.

“They are the party that has consistently underfunded the IRS,” said Rep. Richard Neal (D-Mass.), criticizing Republicans for rolling back tax enforcement measures.  

Despite opposition, the repeal is a significant milestone in the regulatory battle on digital assets. It would be the first major crypto-focused bill to be signed into law during his administration if Trump signs it—a signal that regulators are willing to revisit regulatory architecture in the face of technological advances.

As Washington grapples with how to oversee the increasingly complex crypto environment, the leaders in the sector will probably urge greater definition and safeguards against excessive regulation. Although the reversal of the IRS rule is a win for DeFi supporters, the larger discussion on tax and compliance in crypto is not yet concluded.

Up to now, the crypto community is praising the victory they see as much needed restraint on government intervention, ensuring developers and entrepreneurs the freedom to keep on building in the U.S. with not too much regulatory burden on their shoulders.

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