U.S. Treasury officially removes IRS controversial Biden-era on DeFi
DeFi platforms secured a major win in compliance after the U.S. Treasury officially removed the controversial Biden-era IRS reporting rule.
DeFi platforms got a major win regarding compliance with the Internal Revenue Service. On Thursday, June 10, the U.S. Treasury Department officially eliminated the DeFi broker reporting rules. The controversial Biden-era rule required DeFi platforms to issue IRS 1099‑DA forms for all user transactions.
This repeal was the result of earlier legislative action. Earlier this year, the U.S. Congress repealed the rule under the Congressional Review Act, and President Donald Trump signed the bill in April. DeFi-friendly Congressmen viewed the rule as a burden on DeFi platforms and contrary to the principles of decentralization.
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.
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