Quick Facts
The Trump administration is reportedly poised to undo a Biden-era rule that would have required DeFi protocols to report to the US tax authorities.
Resolution to Kill IRS DeFi Broker Rule Heads to Trump’s Desk – A Blow to Transparency and Accountability?
As the controversy surrounding the decentralized finance (DeFi) space continues to unfold, the latest development has sent shockwaves through the community.
A Brief Recap: The IRS DeFi Broker Rule
In December 2021, the Internal Revenue Service (IRS) announced a long-anticipated rule aimed at bringing DeFi protocols under the tax authorities’ radar. The rule, titled “Brokers Reporting Requirements,” would have required DeFi platforms and operators to report to the IRS any cryptocurrency transactions and holdings above a certain threshold.
The Trump Administration’s Decision
According to recent reports, the Trump administration is now poised to undo the IRS DeFi Broker Rule, effectively reversing the Biden-era decision.
Consequences of the Rule Change
A reversal of the IRS DeFi Broker Rule would likely have far-reaching implications for the DeFi space.
Undermining Transparency: By exempting DeFi protocols from reporting requirements, the rule change would effectively undermine transparency in the DeFi space.
Encouraging Tax Evasion: The lack of reporting requirements would create an environment conducive to tax evasion.
Innovation Stagnation: The absence of a regulatory framework could stifle innovation in the DeFi space.
A Way Forward
While the Trump administration’s decision to reverse the IRS DeFi Broker Rule is a significant setback for advocates of transparency and accountability, it also presents an opportunity for stakeholders to re-evaluate the issue.
Modify the Rule: Rather than completely reversing the rule, the Trump administration could modify it to address concerns over regulatory burdens and compliance costs.
Establish a Clear Framework: The DeFi community should work with regulators to establish a clear and consistent regulatory framework for the space.
Engage in Ongoing Dialogue: Stakeholders, including DeFi developers, operators, and users, should engage in ongoing dialogue with regulators to address concerns and suggest alternative solutions.
