IRS Crypto Broker Rule Dies, But Treasury Keeps Close Watch on Digital Assets
- What Was the Doomed IRS Crypto Broker Rule?
- How Did the Crypto Industry Fight Back?
- What Does the Treasury's Pivot Reveal?
- What's Next for Crypto Regulation?
The controversial IRS "crypto broker" regulation (TD 10021) met its official end in April 2025 when President Trump signed its congressional repeal. While this removes immediate reporting burdens from DeFi protocols, the Treasury Department's latest filings confirm cryptocurrency remains firmly in its regulatory crosshairs. The saga highlights the ongoing tension between innovation and oversight in digital finance.
What Was the Doomed IRS Crypto Broker Rule?
The ill-fated regulation, originally established under Infrastructure Bill provisions, WOULD have forced decentralized protocols to collect and report user transaction data like traditional brokers starting in 2026. This posed impossible compliance challenges for DeFi's non-custodial systems. The rule's expansive language even threatened to ensnare wallet providers and token aggregators despite their lack of fund control. Industry advocates successfully argued it would have:
- Crushed open-source development in the U.S.
- Violated user privacy rights
- Forced projects to relocate offshore
- Created reporting requirements for data that doesn't exist
- Applied stock market rules to fundamentally different technology
How Did the Crypto Industry Fight Back?
Opposition mobilized immediately after the rule's December 2024 approval. The DeFi Education Fund led arguments that non-custodial protocols couldn't possibly comply with requirements designed for entities like Coinbase or Binance US. Their CEO Miller Whitehouse-Levine famously stated: "You can't report data you don't possess." The campaign gained traction through:
- Congressional briefings explaining DeFi's technical realities
- Coalition-building with privacy advocacy groups
- Economic impact studies showing potential innovation drain
- Legal analyses highlighting constitutional concerns
- Strategic media outreach to mainstream outlets
What Does the Treasury's Pivot Reveal?
While abandoning the broker rule, Treasury's recent actions confirm continued crypto scrutiny through other channels. Under Secretary Scott Bessent, the department has:
- Sanctioned Iranian shadow banking networks using crypto
- Blacklisted North Korean hacking groups laundering digital assets
- Participated in G7 global tax policy negotiations
- Advanced digital trade tariff discussions
- Maintained existing reporting for custodial exchanges
What's Next for Crypto Regulation?
The episode establishes important boundaries but leaves key questions unanswered. Industry observers note:
- Clearer distinctions between custodial/non-custodial services
- Ongoing need for compliance innovation in decentralized systems
- Continued geopolitical dimensions of crypto oversight
- Potential for state-level regulatory experiments
- Importance of sustained industry engagement with policymakers
