Breaking: U.S. Treasury Axes Biden-Era IRS Crackdown on DeFi in Landmark Move

The U.S. Treasury just handed DeFi a win—scrapping controversial IRS reporting rules that had the crypto world on edge.

Why it matters: The Biden administration's 2023 push to regulate decentralized finance like traditional brokers sparked fury—and now it's dead.

Behind the reversal: Critics argued the rules were impossible to enforce without killing innovation. Treasury apparently agreed.

Wall Street's take: 'Finally, regulators admit they can't stuff the blockchain genie back in the bottle—though we're sure they'll keep charging $500/hour to try.'

How new IRS reporting rules will work

DeFi platforms are now exempt from these compliance requirements, which include know your customer rules and transaction reporting. Moreover, the Congressional Review Act mechanism ensures that the IRS cannot issue a substantially similar rule in the future unless Congress specifically authorizes it.

The repeal only applies to non-custodial DeFi applications. Centralized exchanges remain obligated to issue 1099‑DA forms. Additionally, all DeFi users still have the obligation to report their own gains and losses to the IRS. They also have to track their activity independently, as the IRS will no longer receive automatic transaction data.

The DeFi industry saw this repeal as a major win. For instance, DeFi Education Fund CEO Miller Whitehouse-Levine viewed the rule as infringing on user privacy and undermining innovation in DeFi. Other experts warned that burdensome rules WOULD push DeFi innovation overseas.

DeFi protocols are decentralized software protocols that theoretically run on their own. They often do not have legal entities that represent them, which makes regulatory and reporting requirements difficult for them to comply with. However, there are also centralized projects that use the DeFi name for marketing purposes.