Original Author: Token Dispatch, Prathik Desai

Original Translation: Block unicorn

U.S. President Donald Trump signed a resolution last Thursday to abolish the controversial IRS DeFi broker rule, scoring his first crypto victory. This is also the first crypto-related bill signed by a U.S. president. After years of regulatory uncertainty, the crypto industry finally has concrete evidence that Washington is listening.

The resolution passed with impressive bipartisan support, with the Senate voting 70-28 and the House voting 292-132, indicating that cryptocurrency may have finally transcended political divisions.

This reversal is more than just canceling a problematic tax rule; it could be a prelude to determining how the DeFi ecosystem will evolve in the world's largest economy.

In this article, we will guide you through the origins of the DeFi broker rule, the significance of its abolition, and, more critically, how it will lay the groundwork for a new crypto regulatory approach under the Trump 2.0 government.

Biden's Farewell "Gift"

On December 27, 2024, the Biden administration finalized a controversial IRS rule in its final weeks, requiring "DeFi brokers" to collect and report user transaction information—a final blow to crypto innovation before the government transition.

The rule expanded the definition of "broker" in the 2021 Infrastructure Act to include DeFi platforms, requiring them to issue 1099 forms to users and report transaction details to the IRS, originally set to take effect on January 1, 2027.

This shocked industry experts and prompted them to fight back.

Why? Seven words: technically impossible to comply.

The Biden administration specifically targeted "frontend service providers". Think MetaMask or Uniswap websites, used by millions to exchange tokens—these intuitive interfaces allow ordinary users to access decentralized protocols.

According to the rule, these frontends would need to collect names, addresses, phone numbers, and transaction details—which in a truly decentralized ecosystem, they simply cannot access.

When faced with this contradictory criticism, the IRS responded with a dismissive statement:

"Persons with technological expertise engaged in trade or business in financial services should comply with the same rules as those operating financial service businesses."

This exposed a profound misunderstanding of how decentralized systems operate. Industry leaders described it as an "irreconcilable contradiction"—requiring entities to collect information they fundamentally cannot access.

This meant platforms would either have to rebuild protocols to collect information that violates user privacy and core decentralization principles, or completely exit the U.S. market.

Biden's Treasury's last-minute extension of the rule to DeFi was seen as administrative overreach without congressional approval.

Trump's AI and Crypto Affairs lead, David Sacks, bluntly called it a "midnight regulation", stating it would "kill U.S. innovation, raise privacy concerns, and impose unprecedented compliance burdens on U.S. DeFi companies."

Turning Point

The significance of abolishing this rule goes far beyond a minor tax policy adjustment.

Under the Congressional Review Act used to nullify the rule, the IRS cannot issue "substantially similar" regulations without new congressional authorization. This is not just a pause on the rule, but creates breathing space for developers and entrepreneurs to develop with more confidence.

The resolution's passage indicates that the crypto industry's long-pursued goal of gaining significant political capital in Washington has finally been achieved.

Want to hear more good news? This might just be the beginning. Treasury Secretary Scott Bessent stated at a recent White House Digital Assets Summit plans to "rescind and modify" related crypto tax rules.

Bipartisan and Industry Support

The most important characteristic of this reversal is its bipartisan victory.

When Republicans and dozens of Democrats vote together to overturn a Democratic government's rule, it reveals a shift in cryptocurrency's political significance and that financial technology innovation deserves room to grow.

This marks a significant departure from the SEC era under Gary Gensler, when Democratic leadership largely supported aggressive enforcement actions against crypto companies.

Even Senate Minority Leader Chuck Schumer broke from party leadership to support the measure, a political calculation that fully illustrates cryptocurrency's growing electoral importance.

Industry groups once difficult to recognize have now become influential voices.

The Blockchain Association and DeFi Education Fund led an aggressive lobbying campaign, successfully turning Democratic votes to ultimately secure a majority sufficient to override a veto. Their success demonstrates that crypto advocacy has rapidly matured, with targeted outreach to key legislators focusing on specific policy issues rather than broad blockchain education.

When the Biden administration introduced the rule, the Blockchain Association promised "aggressive action". They indeed delivered on that promise.

Four months after filing a lawsuit, the association now celebrates the abolition of a rule that threatened to end the U.S. crypto industry.

Importantly, this victory was achieved despite opposition from some influential Democrats who believed the resolution might encourage tax evasion.

Massachusetts Democratic Representative Richard Neal warned that this could result in $4 billion in lost government tax revenue. This estimated income might come from unreported capital gains, which will remain a point of contention as crypto advocates push for further regulatory relaxation.

Global Positioning

The resolution's signing dramatically altered the U.S. position in the global crypto dominance competition.

A stark contrast. Just months ago, crypto companies were abandoning the U.S. market due to regulatory uncertainty.

Coinbase was preparing contingency plans to move overseas. Now, Trump 2.0 government's campaign promise to position the U.S. as the "world's crypto capital" seems to be taking effect.

With global DeFi investment surging—currently around $90 billion locked in protocols according to defillama—countries creating friendly regulatory environments will gain enormous economic benefits: high-skill employment opportunities, tax revenues from legal operations, and technological leadership.

The resolution also sends a powerful signal to regions and countries like Hong Kong, UAE, and Japan positioning themselves as crypto-friendly alternatives.

For global crypto entrepreneurs and investors, Thursday's signing clearly communicated: the U.S. is open for business.

Balancing Act

The resolution raises legitimate questions about balancing innovation with tax compliance.

Critics, like Texas Democratic Representative Lloyd Doggett, argue that abolishing the rule will create exploitable loopholes for wealthy investors.

These concerns are not entirely unfounded.

The decentralized nature of DeFi protocols means transactions occur without traditional intermediary records. While the blockchain itself is transparent, associating wallet addresses with taxpayers remains challenging. Without some reporting mechanism, tax compliance largely depends on voluntary disclosure.

Some policy experts have proposed compromise solutions—creating optional compliance frameworks that exchange certain disclosures for regulatory clarity. This "safe harbor" approach would allow DeFi protocols to operate legally while gradually introducing appropriate safeguards.

Our Perspective

Trump's signing of this resolution is a breakthrough in addressing the core contradiction of crypto regulation, a conflict that has plagued the industry from day one: the collision between industrial-era regulatory frameworks and digital-native financial systems.

This victory demonstrates that Washington finally acknowledges that forcing decentralized systems to adapt to centralized regulatory frameworks is ineffective. Innovation requires appropriate guardrails, not retrofitted obstacles.

This moment reveals deeper insights into US regulatory philosophy. For decades, US financial regulation has followed a pattern: innovation occurs, problems emerge, regulation responds. The DeFi broker rules attempted pre-emptive regulation before understanding technological natural evolution. Its failure indicates that the US is returning to its traditional strength—allowing innovation to flourish while addressing specific issues as they arise.

Celebrations should remain pragmatic. The crypto industry faces a critical credibility test. After gaining regulatory breathing space, it must now provide tangible benefits beyond trader profits. Can DeFi significantly improve financial accessibility? Will it reduce daily transaction costs? Can it create more efficient markets benefiting broader economic participation?

The bipartisan nature of this victory is both an opportunity and a warning. While crypto today transcends partisan lines, its support still depends on demonstrating real-world utility. If the industry cannot move beyond speculation and solve actual problems, today's allies might become tomorrow's critics.

For global competitors who believed the US had abandoned digital asset innovation leadership, this reversal is a wake-up call. The US possesses unparalleled capital markets, technological talent, and regulatory flexibility—when these factors align, they create powerful competitive advantages.

Challenges remain ahead. The SEC's token regulation, CFTC's jurisdiction over derivatives, banks' concerns about stablecoins—these issues remain unresolved. However, this resolution demonstrates that focused, well-organized advocacy targeting specific technical issues can succeed where broad ideological arguments often fail.

The innovation window has opened. Now, the industry must collaborate with regulators to create frameworks that protect consumers while driving genuine innovation. Thursday's signing suggests both sides might finally be prepared for such a dialogue.