IRS Removes Controversial DeFi Broker Rule Effective July 2025

The IRS has officially removed a controversial DeFi broker reporting rule from the U.S. tax code, effective July 10, 2025, following bipartisan Congressional support and President Trump's signature. The repealed rule, originating from the 2021 Infrastructure Investment and Jobs Act and finalized during the Biden administration, would have required decentralized finance platforms to collect and report detailed user transaction data like traditional brokers, a mandate widely criticized as unworkable for automated, decentralized protocols. The repeal exempts DeFi platforms from these compliance obligations, allowing them to avoid significant burdens such as issuing IRS 1099-DA forms and complying with know your customer requirements, though centralized exchanges remain subject to existing reporting rules. Advocates argue the repeal protects user privacy, preserves DeFi innovation, and prevents the migration of DeFi activities overseas, as protocols typically lack traditional legal entities to fulfill broker-like duties. The Treasury Department and IRS have reverted to the prior regulatory framework, treating the broker rule as if it had never taken effect, while noting that future regulations could be developed as the crypto space evolves. This regulatory rollback is seen as a major win for the DeFi industry, potentially boosting confidence and institutional interest in decentralized finance.