IRS Crypto Broker Rule Dies, But Treasury Keeps DeFi in Its Crosshairs
- How Did the IRS Broker Rule Collapse?
- Why Was the Rule So Controversial?
- What’s Next for Crypto Regulation?
- FAQ: Key Questions Answered
The controversial IRS rule (TD 10021) that sought to treat DeFi protocols like traditional brokers was repealed by Congress and signed into law by President Trump in April 2025. While this marks a win for privacy advocates and developers, the Treasury Department confirms it’s still monitoring crypto—focusing on centralized exchanges like Coinbase and Binance US. The failed rule’s overly broad language would have forced DeFi platforms to report nonexistent user data, sparking backlash. Meanwhile, the Treasury remains active in global crypto sanctions and policy debates.
How Did the IRS Broker Rule Collapse?
The now-defunct TD 10021, rooted in the 2021 Infrastructure Act, aimed to impose stockbroker-style reporting (via FORM 1099-DA) on DeFi platforms by 2026. Critics argued it was unworkable: most DeFi protocols lack user identities, custody, or even customer service desks. "You can’t report data you don’t have," said Miller Whitehouse-Levine of the DeFi Education Fund. Opposition surged from developers, privacy groups, and even wallet providers swept into the rule’s vague wording. By early 2025, Congress invoked the Congressional Review Act to kill it entirely—passing the Senate 70-28 and earning Trump’s signature on April 11.
Why Was the Rule So Controversial?
The rule’s fatal flaw? Its "one-size-fits-all" approach. Examples of affected entities included:
- Token aggregators (e.g., 1inch)
- Non-custodial wallets (e.g., MetaMask)
- Frontend developers for decentralized apps
- Liquidity pool creators with no user interaction
- Open-source contributors to DeFi codebases
Even Treasury officials later admitted the language was "overly expansive," per their filing. The backlash mirrored earlier crypto policy fiascos—like the 2021 "crypto tax provision" debacle—where poorly tailored rules sparked industry exodus fears.
What’s Next for Crypto Regulation?
While the broker rule is dead, the Treasury’s crypto scrutiny isn’t. Recent actions show its priorities:
- Sanctions enforcement: Targeting Iranian shadow banks and North Korean hackers laundering stolen crypto (2023–2024).
- Centralized exchange oversight: Platforms like BTCC, Coinbase, and Kraken still face strict reporting.
- Global tax coordination: Active in G7 talks on minimum corporate taxes and digital trade tariffs.
Analysts at BTCC note this reflects a broader trend: "The U.S. is walking a tightrope—cracking down on illicit activity while avoiding innovation-killing overreach."
FAQ: Key Questions Answered
What was TD 10021?
The IRS rule requiring DeFi platforms to report user transactions as brokers, repealed in April 2025.
Which crypto sectors are still regulated?
Centralized exchanges (e.g., Binance US, BTCC) and custodial intermediaries remain under existing rules.
Did the rule affect hardware wallets?
No—the Treasury’s reversal explicitly exempts non-custodial tools like Ledger and Trezor.
