IRS Crypto Broker Rule Dies, But Treasury Keeps Digital Assets in Its Crosshairs

What Was the IRS Crypto Broker Rule That Just Got Killed?

The now-defunct TD 10021 regulation would have forced all crypto platforms - including decentralized protocols - to report user transaction details to the IRS using new Form 1099-DA. Proposed under Section 6045 of the tax code and enabled by the 2021 Infrastructure Investment Act, the rule treated DeFi protocols like traditional stock brokers. This meant requiring them to track and report: 1) Transaction amounts, 2) Wallet addresses, 3) User identities - despite most DeFi platforms having no custody of funds or customer data. Scheduled for implementation in 2025 with full enforcement by 2026, the rule faced immediate backlash from developers who argued it was technologically impossible to comply with. "You can't report data you don't possess," stressed Miller Whitehouse-Levine of the DeFi Education Fund. Industry groups warned it would crush U.S. open-source development, pushing projects overseas.

How Did This Crypto Regulation Get Overturned?

The repeal process gained momentum through 2024 as bipartisan opposition grew. Congress ultimately invoked the Congressional Review Act to completely nullify the regulation. The Senate passed the repeal 70-28, followed by House approval, leading to President TRUMP signing the measure on April 11. This marked a rare legislative rebuke of Treasury rulemaking. The Treasury's quiet withdrawal this week confirms their acceptance of Congress's directive - that broker reporting requirements should only apply to custodial exchanges like Coinbase or Binance US, not decentralized protocols or front-end developers. Notably, this represents a significant policy shift from Treasury's original expansive interpretation.

Why Was the Crypto Industry So Opposed to This Rule?

Five key objections drove the fierce resistance: 1) Technical impossibility for non-custodial systems to gather required data, 2) Overreach affecting wallet providers and token aggregators who never touch user funds, 3) Privacy concerns about mass collection of wallet addresses and transaction histories, 4) Threat to U.S. competitiveness in blockchain innovation, 5) Vague language creating compliance uncertainty. Even Bitcoin advocates like the BTCC research team noted the rule's "one-size-fits-all" approach ignored fundamental differences between traditional finance and decentralized systems. TradingView data shows the crypto market reacted positively to the repeal news, with DeFi tokens gaining 5-7% on average.

Is the Treasury Backing Down From Crypto Oversight Entirely?

Not according to their recent actions. Under Secretary Scott Bessent, Treasury has: 1) Sanctioned Iranian shadow banking networks using crypto, 2) Frozen assets of North Korean hackers laundering stolen crypto, 3) Participated in G7 discussions on global crypto taxation, 4) Advised on international digital trade agreements, 5) Continued monitoring crypto's role in illicit finance. Their strategic focus appears to be shifting from broad domestic regulation to targeted enforcement against bad actors and international policy coordination. This aligns with the Biden administration's 2023 Executive Order emphasizing "responsible innovation" in digital assets.

What Does This Mean for Crypto Investors and Developers?

The regulatory landscape now offers clearer boundaries: 1) Custodial exchanges remain subject to strict reporting, 2) DeFi protocols avoid broker requirements for now, 3) Treasury prioritizes illicit activity over broad surveillance, 4) Congressional oversight checks executive overreach, 5) Global standards remain in flux. While this provides temporary relief for DeFi builders, experts caution the reprieve may be temporary. "The policy debate isn't over - it's just moving to international forums," noted a BTCC market analyst. CoinGlass derivatives data suggests traders are pricing in reduced regulatory risk for DeFi projects through 2026.

How Are Other Countries Handling Crypto Reporting Rules?

Comparative approaches reveal a global patchwork: 1) EU's MiCA regulations exempt some DeFi (until 2027 review), 2) UK applies "same risk, same regulation" principles, 3) Singapore uses payment services licensing, 4) Japan mandates exchange reporting but not DeFi, 5) Switzerland has token-specific frameworks. The U.S. repeal creates unusual divergence from FATF guidelines, potentially complicating future international cooperation. Treasury officials emphasize they're working through G20 channels to harmonize standards without stifling innovation.

What's Next for Crypto Regulation in America?

Three developing fronts bear watching: 1) SEC's ongoing enforcement actions against unregistered securities, 2) Stablecoin legislation progressing through House committees, 3) Treasury's promised 2025 guidance on mixing services and privacy tools. The broker rule repeal sets an important precedent for limiting regulatory creep into protocol-layer development. However, as crypto markets rebound (BTC +18% YTD per TradingView), pressure will grow for clearer rules. "This was a battle win, not the war's end," cautions a DC blockchain lobbyist.

Frequently Asked Questions

What exactly was TD 10021?

The defeated Treasury regulation WOULD have classified all crypto platforms - including decentralized protocols - as "brokers" required to report user transactions to the IRS using Form 1099-DA, despite most having no customer data.

Why couldn't DeFi comply with the broker rule?

Most DeFi protocols are non-custodial (don't hold user funds), permissionless (no account signups), and automated - making it technologically impossible to collect the required taxpayer information.

Are centralized exchanges still regulated?

Yes, platforms like Coinbase, BTCC, and Binance US remain subject to existing broker reporting rules as custodial businesses with customer relationships.

Does this mean crypto is unregulated now?

No - anti-money laundering rules, securities laws, and sanctions enforcement still apply. This only prevents treating DeFi like traditional brokers.

Could similar regulations return?

Possibly through future legislation, but the Congressional repeal makes near-term revival unlikely. The debate will likely shift to international standards.