The Controversial “DeFi Broker Rule” has been KILLED

On April 10, 2025, President Donald Trump signed a resolution officially killing the controversial IRS "DeFi Broker Rule," a regulatory measure that would have fundamentally reshaped the decentralized finance (DeFi) landscape in the United States. Originally introduced during the final days of the Biden administration, the rule sought to expand the definition of a “broker” to include decentralized finance platforms—entities that by design operate without intermediaries or centralized control.

Had the rule gone into effect, it would have forced DeFi protocols—many of which are governed by code, not companies—to comply with traditional tax reporting standards, including collecting and submitting user data to the IRS and prepare and submit 1099-DAs reporting over user proceeds. This mandate presented an existential threat to DeFi, which relies on anonymity, self-custody, and peer-to-peer transactions. Many platforms would have been unable to comply due to the sheer absence of KYC (Know Your Customer) infrastructure, and developers could have faced legal risk simply for creating or maintaining open-source code.

The implications for the U.S. crypto community would have been severe: developers might have fled to jurisdictions with more favorable regulatory climates, capital would have followed, and innovation in blockchain-based financial tools could have been stifled for years. In effect, the rule would have driven DeFi out of the U.S.—handing the future of financial decentralization to other nations. DeFi would be dead, and U.S. crypto investors would effectively be limited to trading on centralized exchanges.

The repeal signals a major win for the crypto industry and a recognition that overly aggressive regulation risks killing the very innovation it claims to protect. With this rule overturned, U.S.-based builders, investors, and users can continue to participate in the growing DeFi ecosystem without fear of regulatory overreach. It’s a critical step in ensuring that America remains a competitive and welcoming hub for Web3 innovation. If the IRS wants to make up silly rules, Congress will need to rewrite new measures that actually synergize with a pro-crypto United States, or otherwise risk another embarrassing repeal.

More discussion to come on how this impacts your tax preparation and strategy in navigating this evolving ecosystem.