IRS Backs Down: Controversial Crackdown on Decentralized Exchanges Scrapped

In a surprise move, the IRS just folded its hand against DeFi. The tax agency quietly dropped its proposed rule that would’ve forced decentralized exchanges to collect user data—a move crypto advocates called ‘unworkable overreach.’

Why this matters: The reversal signals regulators are struggling to keep pace with DeFi’s rapid evolution. Without clear on/off ramps, even tax collectors are realizing you can’t KYC a smart contract.

The irony: Traditional finance spends millions lobbying against crypto… while the IRS can’t even decide if it’s taxable property or securities. Maybe they should hire a blockchain consultant—or just buy the dip.

TLDR

• IRS drops DeFi broker rule after CRA repeal, ending reporting mandate

• Congress kills IRS rule forcing DeFi to report user data to Treasury

• Crypto broker rule targeting DeFi repealed, IRS withdraws enforcement

• DeFi escapes IRS reporting rule as CRA resolution voids regulation

• IRS backs off DeFi rule; broker reporting mandate officially repealed

The U.S. Department of the Treasury and the Internal Revenue Service (IRS) have formally removed the crypto broker rule targeting decentralized exchanges. This decision follows a joint resolution passed by Congress and signed into law, effectively eliminating the rule’s legal authority. The repeal marks the end of a regulatory push that sparked major concerns within the crypto and DeFi communities.

💥 BREAKING: CRYPTO TAXES

The US Treasury has removed crypto broker reporting rules — including Form 1099‑DA

It was designed to require crypto brokers, including DeFi platforms, to report users’ digital asset transactions to the IRS for tax compliance

Let’s gooo! 🔥 pic.twitter.com/dpGOASbW3Y

— Real World Asset Watchlist (@RWAwatchlist_) July 10, 2025

The IRS had finalized the rule in December 2024 to require DeFi protocols to report customer transactions like traditional brokers. The rule became effective on February 28, 2025, but faced immediate criticism from across the digital asset sector. Opponents argued that decentralized platforms lack the infrastructure to collect the required personal data.

Under the final rule, platforms facilitating crypto asset sales had to report gross proceeds and user details to the IRS. Non-custodial DeFi protocols were expected to gather names, addresses, and tax identification numbers from users. However, many protocols operate autonomously through code and do not directly interact with users.

Congress Blocks Rule Through CRA Resolution

In early 2025, lawmakers challenged the IRS regulation using the Congressional Review Act, which allows reversal of federal rules. The House passed the resolution disapproving the rule on March 11, followed by the Senate on March 26. President Donald TRUMP signed the resolution into law on April 10, rendering the rule void.

Following the CRA’s application, the IRS confirmed the rule has no force or effect under federal law. Consequently, the agency reverted the relevant tax code sections to their previous versions before February 2025. The IRS emphasized that it is not initiating a new rulemaking process but only reflecting the legislative outcome.

The repeal gained momentum after DeFi participants and privacy advocates raised enforcement and constitutional concerns. Many argued that decentralized platforms cannot feasibly comply due to their permissionless nature. Lawmakers supporting the repeal stated the rule WOULD stifle blockchain innovation and overextend federal reach.

IRS Removes Rule from Federal Register

The IRS officially removed the rule titled “Gross Proceeds Reporting by Brokers that Regularly Provide Services Effectuating Digital Asset Sales.” The rule was previously published in the Federal Register on December 30, 2024. It is now scheduled to be erased from the register on July 11, 2025.

Officials clarified that the removal action is not subject to public comment or delays. The repeal does not reflect a policy change but follows the CRA’s automatic requirements. Any future regulations on digital assets will require new administrative procedures.

While the rule aimed to close perceived tax gaps in crypto reporting, it drew sharp opposition over technical and legal limitations. Its repeal removes obligations from decentralized protocols, though the IRS may revisit alternative approaches later. DeFi platforms remain outside the scope of broker reporting rules under Section 6045.