The US Congress is taking an important step to repeal the tax regulation on decentralized finance (DeFi) that the IRS issued last December. If passed, this decision could significantly impact how DeFi protocols operate in the US.

US House Takes Initial Steps to Repeal DeFi Tax Regulation

🔹 The House Ways and Means Committee voted 26-16 to propose the repeal of the tax regulation of#IRS for DeFi.
🔹 This decision is made under the Congressional Review Act (CRA), allowing Congress to repeal a federal rule if there is enough support from both the House and Senate, followed by the President's signature.
🔹 The proposal is currently being brought before the entire House for further consideration.

The IRS approved the cryptocurrency transaction reporting system in December 2024, requiring DeFi protocols to report like traditional brokers. However, the crypto industry argues that this regulation is inappropriate, greatly affecting how DeFi protocols operate and extending the scope of taxation to non-broker entities.

Many companies and organizations in the crypto field, including the Blockchain Association, have signed a letter requesting the repeal of this regulation.

The Confrontation Between the Two Republican and Democratic Factions

The proposal to repeal the tax regulation #defi is generating a heated debate between the Republican and Democratic parties.

📢 Congressman Mike Carey (Ohio, Republican) voiced support for the repeal of this regulation:
🗣️ "We must pass this resolution to avoid a nightmare for American taxpayers and for the IRS."

📢 Senator Ted Cruz (Texas, Republican) is also pushing for a similar version of the resolution in the Senate.

Meanwhile, the Democrats strongly oppose:

📢 Congressman Richard Neal (Massachusetts, Democrat) believes the IRS regulation is reasonable and necessary to ensure that everyone fulfills their tax obligations when trading crypto:
🗣️ "This bill will repeal reasonable regulations aimed at ensuring people report their taxes fully, rather than evading by selling crypto without reporting profits."

Democrats argue that if this regulation is removed, the US could lose about $3.9 billion in tax revenue over the next 10 years.

📢 Congressman Jason Smith (Missouri, Republican) rebutted and accused the IRS of overstepping its authority by issuing this regulation in the final days of the former President's term.#JoeBiden :
🗣️ "Not only is it unfair, but it is also unfeasible."

Potential Impact on the Crypto Market

✅ If the IRS regulation is removed, DeFi protocols will not be required to report transactions like traditional brokers, helping to maintain the decentralization and anonymity of the DeFi ecosystem.
✅ If the regulation remains in place, many DeFi protocols may have to exit the US market or adjust their operating models, creating legal complexities.

Currently, everything depends on the final decision of the US Congress and President Trump's signature. If passed, this would be a major victory for the DeFi industry and crypto investors.