A bipartisan effort is underway in Congress to overturn an Internal Revenue Service (IRS) regulation that would impose stringent reporting requirements on decentralized finance (DeFi) platforms.
The Congressional Review Act (CRA) resolution, led by Republican Senator Ted Cruz and Representative Mike Carey, seeks to nullify the rule, which critics say could stifle blockchain innovation and impose undue compliance burdens.
The White House has expressed support for the CRA resolution, signaling a potential shift toward a more innovation-friendly approach to digital asset regulation.
On Tuesday, David Sacks, the administration’s crypto policy advisor, criticized the IRS rule, calling it an “11th-hour attack on the crypto community.”
IRS Rule Expands Broker Definition to Include DeFi Developers
The IRS rule, finalized in December, expands the definition of a “broker” to include software developers and front-end operators of DeFi platforms.
Under this regulation, these entities would be required to report gross proceeds from crypto sales and collect taxpayer data, including user identities and transaction histories. Critics argue that this approach misinterprets DeFi’s decentralized nature.
The resolution, designated as S.J. Res. 3, was introduced on January 21 and has gained traction among lawmakers concerned about its potential impact on the digital asset sector.
The Senate was originally scheduled to vote on the measure on March 5, but scheduling conflicts, including the upcoming State of the Union address, may delay proceedings.
Industry Opposition and Concerns Over Regulatory Overreach
Crypto advocacy groups, including the Blockchain Association, have voiced strong opposition to the IRS rule, warning that it could drive blockchain innovation out of the United States.
They argue that DeFi developers and software providers do not have direct control over user funds and should not be subjected to traditional broker reporting requirements.
If the resolution passes both the Senate and House, it would overturn the IRS regulation, preventing its enforcement. The outcome of this vote could set a precedent for future regulatory efforts affecting the cryptocurrency sector.
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