In a decisive blow to crypto taxation, the Senate overwhelmingly voted to strike down the IRS’s controversial DeFi rule on Monday. The resolution, introduced by Senator Ted Cruz, sailed through with a 70-27 vote. Nineteen Democrats crossed party lines to join Republicans. Not exactly a close call.
The December 2024 IRS rule would have forced decentralized finance platforms to collect user data for tax reporting. Critics called it technologically impossible. Because, you know, code doesn’t work that way. The rule aimed to squeeze more tax revenue from crypto transactions by expanding the definition of “brokers” to include DeFi platforms.
Enforcing impossible data collection on code that can’t comply? Classic bureaucracy meets blockchain reality.
Industry groups immediately celebrated. The Blockchain Association, Coin Center, and DeFi Education Fund all praised the vote as a victory for innovation. The vote was approved under the Congressional Review Act on March 4. They’d been arguing for months that the rule showed a fundamental misunderstanding of how DeFi actually works. Turns out enough senators actually listened.
The economic impact isn’t small. The Joint Committee on Taxation estimates the government will miss out on $3.9 billion in revenue over the next decade without this rule. But supporters argue the boost to U.S. competitiveness in crypto development is worth it. More DeFi projects staying in America. Novel concept.
Next up: the House must vote. The rule specifically threatened the core of DeFi protocols that operate through smart contracts rather than traditional financial intermediaries. The resolution needs just a simple majority there, and President Trump is expected to sign it if passed. The timeline remains unclear, but crypto advocates are pushing for quick action. If signed, it would permanently block the IRS from imposing similar rules. This represents a significant victory for the cryptocurrency industry as a whole.
This vote represents part of a broader trend reversing Biden-era crypto regulations. It comes just days before a planned White House crypto summit on March 7. The strong bipartisan support—particularly among younger senators—signals growing crypto-friendly sentiment in Congress.
The message to regulators seems clear: understand the technology before trying to regulate it. Revolutionary idea, right?
