After Trump took office, the crypto market has seen a series of favorable policy announcements. On March 4, local time, the US Senate passed the resolution to revoke the "DeFi Broker Rule" by a vote of 70 to 27. David Sacks, the White House's AI and Crypto Advisor, posted on social media that "the White House is pleased to announce its support for the Congressional Review Act (CRA) introduced by Senator Ted Cruz and Congressman Mike Carey to revoke the so-called 'DeFi Broker Rule' - the Biden administration's last-minute attack on the crypto community."
However, the resolution still needs to be passed by the House of Representatives, and then President Trump can sign it into law. Once completed, not only will the rule be completely abolished, but the IRS will also be prohibited from implementing similar policies in the future. The White House stated that the President may quickly sign this resolution.
The Blockchain Association, representing well-known crypto companies like Coinbase, Kraken, and Uniswap Labs, supports the abolition of this rule, stating that it will prevent unnecessary restrictions on DeFi innovation. The DeFi Education Fund said the Senate's vote is "the first of many historic milestones in the regulation of digital assets in America."
Why Revoke the "DeFi Broker Rule"?
The DeFi Broker Rule is a regulatory framework for decentralized finance (DeFi) intermediary service providers (such as trading platforms, lending protocols, etc.) that came into effect on January 1, 2025. It aims to ensure compliance, user protection, and risk management. The core content includes anti-money laundering (AML), know-your-customer (KYC), smart contract audits, fund security, and transparency requirements. According to the professional interpretation of TaxDAO, this rule has a certain positive effect on anti-money laundering, counter-terrorism, and anti-tax evasion.
In fact, the DeFi Broker Rule had already sparked considerable controversy in the industry even before its implementation. Since decentralized platforms do not hold funds or store customer data like traditional financial institutions, many critics believe the rule is unrealistic and a case of "over-regulation." The digital asset think tank Coin Center called the proposal "technically infeasible".
The main reason is that the DeFi Broker Rule attempts to regulate DeFi using a TradFi mindset, without adapting to the development logic and characteristics of Crypto, and ignoring the decentralization and anonymity of DeFi, fundamentally misunderstanding the technology it seeks to regulate. The DeFi Broker Rule raises higher compliance management requirements, requiring practitioners to strictly fulfill tax reporting obligations and mandatorily implement KYC mechanisms. Taking the 1099-DA form reporting standard as an example, this regulation clearly requires brokers to submit investors' digital wallet addresses and transaction volumes, which will substantially change the existing trading model: on the one hand, the KYC mechanism will lose the anonymity of DeFi, significantly reducing the level of privacy protection; on the other hand, the collection, processing, and reporting of user data will greatly increase operating costs and compliance pressure.
This TradFi regulatory approach may have a more far-reaching impact on the development of DeFi: first, the addition of manual review steps will interfere with the automated execution of smart contracts, affecting the efficiency of decentralized governance mechanisms; second, the information disclosure obligations are fundamentally at odds with the core principles of the DeFi ecosystem. If the regulation continues to strengthen transparency requirements and weaken anonymity, it not only will change the trading behavior patterns of the user community, but may also severely constrain the market competitiveness and innovation vitality of the decentralized finance system.
Senator Ted Cruz, the initiator of the effort to revoke the DeFi Broker Rule, said in his pre-vote Senate speech that "DeFi is a microcosm of the crypto revolution." He called the rule "incoherent" federal overreach. He believes that the rule of treating software developers as brokers (and forcing them to disclose user data and personal information) is meaningless, "as their software never held or controlled user funds."
Michele Korver, Head of Regulatory Affairs at a16z Crypto, also stated that the new broker reporting rule issued by the US Treasury Department yesterday poses a direct threat to the vision for DeFi development and may impede the future of DeFi innovation in the US. To this end, a16z Crypto supports the Blockchain Association, DeFi Education Fund, and Texas Blockchain Council in filing a lawsuit accusing the IRS and Treasury Department of exceeding their statutory authority, violating the Administrative Procedure Act (APA), and even being unconstitutional.
Under Trump, "Crypto Deregulation", DeFi Takes the Lead
The proposal was passed by an overwhelming vote of 70 to 27, indicating that not only Republicans but also many Democrats support the development of Crypto. A similar situation occurred in the previous Congress when the vote to repeal the SEC's crypto accounting rules, showing that the bipartisan support for Crypto development is continuously strengthening, continuing the trend of cooperation on crypto legislation, which may bring good news for this year's stablecoin legislation and other crypto bills.
With Trump back in office, the most crypto-friendly US Congress in history has emerged. Although the performance of President Coin, First Lady Coin, and Trump's recent emphasis on a "crypto strategic reserve" has left many disappointed, the policy shift is indeed beneficial to the crypto market. On the third day after returning to the White House, on January 23, 2025, Trump signed an executive order establishing a crypto working group, tasked with proposing new digital asset regulatory recommendations and exploring the establishment of a national crypto reserve. The order explicitly prohibits the creation of a central bank digital currency (CBDC) in the US, to avoid government-issued digital currency competing with existing cryptocurrencies.
As the core component of the crypto world, DeFi was also the first to be targeted by the pressure and jurisdiction of regulatory agencies like the SEC in the early years. But recently, there have been frequent positive regulatory signals in the DeFi field, indicating a clear shift in the attitude of the regulatory authorities. From the SEC's announcement to withdraw the Kraken lawsuit; close the investigation into Gemini; terminate the three-year investigation into Uniswap Labs without taking any enforcement action; Wintermute and Citadel Securities, two major market maker giants, begin to enter the US market; the release of Tornado Cash founder Alexey Pertsev on a temporary basis...
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In addition, the SEC has withdrawn the accounting guidance that required listed companies to record third-party crypto assets as both assets and liabilities, and announced the establishment of a crypto task force to develop a comprehensive and clear regulatory framework, and stated that it will reduce the intensity of crypto enforcement, reallocating more than 50 dedicated lawyers and staff to ease the regulatory pressure on the industry. Furthermore, last month the SEC confirmed the crypto ETF applications of several major US traditional giants, and concentrated on withdrawing lawsuits and investigations against crypto projects like Coinbase, Robinhood, and Uniswap. These measures indicate that the SEC's attitude towards crypto assets is shifting from "strict regulation" to "friendly."
In the future, under the regulatory policy relaxation represented by the "DeFi Broker Rules" revocation, the crypto market may not only see positive news. In a relaxed regulatory environment, how to crack down on money laundering and other illegal activities, and how to ensure tax fairness and market order? Against the backdrop of the rapid development of the crypto industry, how to find a balance between encouraging innovation and strengthening regulation? This "Crypto President", how will he fulfill the promise of making the United States the world's crypto capital? All of this still needs to be answered through the continuous exploration and integration of the crypto market and regulatory policies.
