IRS Removes DeFi Reporting Rule from U.S. Tax Code

The removal of the rule, which originated from the 2021 Infrastructure Investment and Jobs Act, rolled back the expansion requiring customer transaction reports for decentralized protocols. This decision ends the tax burden on DeFi entities. Affected stakeholders include the U.S. Department of the Treasury, IRS, and Congress. Bipartisan Congressional action and President Trump’s signature enabled this change. The repeal clears compliance obligations for DeFi projects, enabling more focus on innovation. Centralized exchanges remain under existing reporting requirements.

The removal of the rule relieves DeFi protocols from significant compliance costs, potentially reviving institutional interest. Market participants view this as a positive regulatory shift, anticipating increased activity in decentralized finance spaces like Ethereum and related DeFi tokens.

The decision is expected to enhance market confidence, reflecting historical trends where regulatory reliefs in crypto led to growth. DeFi activity may witness increased engagement, driven by this reduction in regulatory pressures on decentralized protocols.

“Under the joint resolution and by operation of the CRA [Congressional Review Act], this final rule has no legal force or effect … The Department of the Treasury and the IRS hereby remove this final rule from the Code of Federal Regulations (CFR) and revert the relevant text of the CFR back to … prior to the effective date of this final rule.” – U.S. Department of the Treasury

To see more about the legislative progress, visit the House Joint Resolution 25 and the Senate’s passing measure revoking IRS mandates.