US Senate Moves to Kill DeFi Reporting Rule: Details

The U.S. Senate has voted to repeal a Biden-era rule that sought to impose stringent reporting requirements on decentralized exchanges. The decision, made on March 4 with a 70-27 vote, effectively nullifies a regulatory framework that would have mandated DeFi protocols to report crypto transactions to the Internal Revenue Service (IRS).

The resolution now moves to the House of Representatives, where it must pass before reaching President Donald Trump. The administration has signaled strong support for overturning the rule, with White House crypto policy advisor David Sacks confirming Trump’s backing for the repeal.

Kristin Smith, CEO of The Blockchain Association, hailed the Senate’s decision as a major step forward for the U.S. crypto industry. She stated that this marks the first time Congress has taken direct action to counter restrictive crypto regulations. “DeFi is an American strategic strength, and today’s action helps ensure it will continue to develop on home soil,” Smith said.

DeFi Reporting Rule Was Impractical: Experts

The repealed rule, originally introduced under the Biden administration, sought to expand IRS oversight by requiring decentralized exchanges to report gross proceeds from crypto sales, along with detailed taxpayer information. Critics argued that the policy was not only unworkable but also threatened innovation within the U.S. crypto sector.

Eli Cohen, general counsel at Centrifuge, described the regulation as fundamentally flawed. “The rule never made any sense and was unworkable in practice,” Cohen stated. He further clarified that its repeal does not eliminate tax obligations but simply shifts the responsibility back to individual taxpayers rather than placing the burden on intermediaries.

Despite the Senate’s move, crypto investors are still required to report their holdings and transactions to the IRS. However, the absence of strict broker reporting requirements relieves decentralized exchanges of a compliance burden many saw as incompatible with the very nature of DeFi.

Crypto Regulation in the US

The Senate’s decision is part of a broader trend toward fostering a more crypto-friendly legislative environment. Smith noted that this Congress is shaping up to be the most pro-crypto in U.S. history, and the repeal sets the stage for further regulatory advancements.

“This bodes well for the efforts to design and pass stablecoin and market structure legislation,” she added, suggesting that the shift in Washington’s approach could encourage crypto businesses to remain in the U.S. rather than relocate abroad.