U.S. President Donald Trump signed a resolution last Thursday to abolish the controversial IRS DeFi broker rule, scoring his first cryptocurrency victory. This is also the first crypto-related bill signed by a U.S. president. After years of regulatory uncertainty, the crypto industry finally has concrete evidence that Washington is listening.

The resolution passed with impressive bipartisan support, with the Senate voting 70-28 and the House voting 292-132, indicating that cryptocurrency may have finally transcended political divisions.

This reversal is more than just canceling a problematic tax rule; it could be a prelude to determining how the DeFi ecosystem will evolve in the world's largest economy.

In this article, we will guide you through the origins of the DeFi broker rule, the significance of its abolition, and, more critically, how it will lay the groundwork for a new crypto regulatory approach under the Trump 2.0 government.

Biden's Farewell "Gift"

On December 27, 2024, the Biden administration finalized a controversial IRS rule in its final weeks, requiring "DeFi brokers" to collect and report user transaction information—a final blow to crypto innovation before the government transition.

The rule expanded the definition of "broker" in the 2021 Infrastructure Act to include DeFi platforms, requiring them to issue 1099 forms to users and report transaction details to the IRS, originally scheduled to take effect on January 1, 2027.

This shocked industry experts and prompted them to fight back.

Why? Seven words: technically impossible to comply.

The Biden administration specifically targeted "frontend service providers". Think MetaMask or Uniswap websites, used by millions to exchange tokens—these intuitive interfaces allow ordinary users to access decentralized protocols.

According to the rule, these frontends would need to collect names, addresses, phone numbers, and transaction details—which they simply cannot obtain in a truly decentralized ecosystem.

When faced with criticism of this contradiction, the IRS responded with a dismissive statement:

"Persons with technological expertise engaged in trade or business in financial services should comply with the same rules as those operating financial service businesses."

This exposed a profound misunderstanding of how decentralized systems operate. Industry leaders described it as an "irreconcilable contradiction"—requiring entities to collect information they fundamentally cannot access.

This meant platforms would either have to rebuild protocols to collect information that violates user privacy and core decentralization principles, or completely exit the U.S. market.

Biden's Treasury's last-minute extension of the rule to DeFi was seen as administrative overreach without congressional approval.

Trump's AI and crypto affairs head David Sacks bluntly called it a "midnight regulation", stating it would "kill U.S. innovation, raise privacy concerns, and impose unprecedented compliance burdens on U.S. DeFi companies."

Turning Point

The significance of abolishing this rule goes far beyond a minor tax policy adjustment.

Under the Congressional Review Act used to nullify the rule, the IRS cannot issue "substantially similar" regulations without new congressional authorization. This not only paused the rule but created breathing space for developers and entrepreneurs to develop with more confidence.

The resolution's passage indicates that the crypto industry's long-pursued goal of gaining significant political capital in Washington has finally been achieved.

Want to hear more good news? This might just be the beginning. Treasury Secretary Scott Bessent recently stated at a White House digital assets summit plans to "rescind and modify" related crypto tax rules.

Bipartisan and Industry Support

The most important characteristic of this reversal is its bipartisan victory.

When Republicans and dozens of Democrats voted to overturn a Democratic government's rule, it revealed a shift in cryptocurrency's political significance and the value of financial technology innovation having room to grow.

This marks a significant departure from the SEC era under Gary Gensler, when Democratic leadership largely supported aggressive enforcement actions against crypto companies.

Even Senate Minority Leader Chuck Schumer broke from party leadership to support the measure, a political calculation that fully demonstrates cryptocurrency's growing electoral importance.

Industry groups once difficult to recognize have now become influential voices.

The Blockchain Association and DeFi Education Fund led an aggressive lobbying campaign, successfully reversing Democratic votes to ultimately obtain a majority sufficient to override a veto. Their success demonstrates that crypto advocacy has rapidly matured, with targeted outreach to key legislators focusing on specific policy issues rather than broad blockchain education.

When the Biden administration introduced the rule, the Blockchain Association promised "aggressive action". They indeed delivered on that promise.

Four months after filing a lawsuit, the association now celebrates the abolition of a rule that threatened to end the U.S. crypto industry.

Importantly, this victory was achieved despite opposition from some influential Democrats who believed the resolution might encourage tax evasion.

Massachusetts Democratic Representative Richard Neal warned that this move could result in $4 billion in lost government tax revenue. This estimated income might come from unreported capital gains, which will remain a point of contention as crypto advocates push for further regulatory relaxation.

Global Positioning

The resolution's signing dramatically changed the U.S. position in the global crypto dominance competition.

A stark contrast. Just months ago, crypto companies were preparing to abandon the U.S. market due to regulatory uncertainty.

Coinbase was preparing contingency plans to move overseas. Now, the Trump 2.0 government's campaign promise to position the U.S. as the "world's crypto capital" seems to be taking effect.

With global DeFi investment surging—currently around $90 billion locked in protocols according to defillama—countries creating friendly regulatory environments will gain enormous economic benefits: high-skill employment opportunities, tax revenues from legal operations, and technological leadership.

The resolution also sent a powerful signal to regions and countries like Hong Kong, UAE, and Japan positioning themselves as crypto-friendly alternatives.

For global crypto entrepreneurs and investors, Thursday's signing clearly communicated: the U.S. is open for business.

Balancing Act

The resolution raised reasonable questions about balancing innovation with tax compliance.

Critics, like Texas Democratic Representative Lloyd Doggett, argued that abolishing the rule would create exploitable loopholes for wealthy investors.

These concerns are not entirely unfounded.

The decentralized nature of DeFi protocols means transactions occur without traditional intermediary records. While the blockchain itself is transparent, associating wallet addresses with taxpayers remains challenging. Without some reporting mechanism, tax compliance largely depends on voluntary disclosure.