The United States Senate passed a resolution aimed at deregulating the Internal Revenue Service’s (IRS) oversight of the decentralized finance (DeFi) sector.

Senator Ted Cruz introduced the motion. It passed with a bipartisan 70-27 vote on March 4 under the Congressional Review Act (CRA). This signaled broad legislative support for easing regulatory burdens on the DeFi sector.

US Senate Votes to Deregulate IRS Oversight of DeFi

The IRS rule sought to classify DeFi trading front-end services as “brokers.” This required them to report user transactions like traditional financial intermediaries. Moreover, it imposed know-your-customer (KYC) checks and tax reporting obligations on these platforms.

While the rule was finalized in December 2024, the regulations were set to take effect on January 1, 2027. Critics argued that the rule undermined DeFi’s decentralized nature, potentially forcing platforms to shut down, relocate, or transition to permissionless models that bypass compliance requirements. 

In fact, the Blockchain Association, along with the DeFi Education fund and the Texas Blockchain Council, filed a lawsuit challenging the IRS’ broker rulemaking. Kristin Smith, CEO of the Blockchain Association, maintained that the rule’s expanded definition of “broker” imposed unconstitutional compliance requirements on DeFi platforms, threatening innovation in the sector.

Now, the crypto. industry is widely celebrating the repeal. The decision is viewed as a step toward fostering innovation in blockchain-based finance.

Smith framed the vote as a stepping stone toward broader crypto-friendly policies. 

“This is the most pro-crypto Congress ever and this effort was the first moment to convert that sentiment into action,” she posted.

Moreover, Coinbase’s Chief Legal Officer, Paul Grewal, noted the bipartisan nature of the vote. He highlighted that 17 Democrats joined all Republicans in opposing the IRS measure. 

“Democrats and Republicans can still do things together when they just try,” he wrote.

Miles Jennings, general counsel at venture firm Andreessen Horowitz (a16z), echoed the sentiment. He referred to crypto as “a rare bipartisan issue in DC.” 

“A big win for DeFi developers and US innovation!” Jennings remarked.

Despite its Senate victory, the resolution must still pass the House of Representatives before reaching President Donald Trump’s desk for final approval. The White House’s AI and crypto czar, David Sacks, has already indicated support.

“The White House is pleased to announce its support for the CRA introduced by Senator Ted Cruz and Representaive Mike Carey to rescind the so-called Broker DeFi Rule, an 11th hour attack on the crypto community by the Biden administration,” he wrote.

If passed by the House and signed into law by Trump, the repeal would cement DeFi’s legal standing in the US, providing clarity and regulatory relief to developers and platforms operating within the space. 

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