Resolution to Overturn IRS DeFi Broker Rule Could Become Law By Week's End
The Senate is set to vote again Thursday to overturn controversial DeFi rule
Welcome to the Wednesday edition of the Crypto In America newsletter!
A law that would prevent the Internal Revenue Service from collecting reporting information from decentralized finance (DeFi) entities could be signed into law by President Trump as soon as Friday, Crypto In America has learned.
According to a well-placed Republican Senate aide, the upper chamber plans to vote for a second time to repeal the IRS’s so-called 'DeFi broker rule,' enacted during the final days of the Biden administration. The rule, as it stands, would require decentralized crypto entities to comply with standard IRS reporting requirements, which critics argue is cumbersome could hinder innovation.
A second vote by the Senate on the Congressional Review Act (CRA) resolution is required due to a constitutional provision that mandates bills related to the federal budget must originate in the House of Representatives. The Senate initially passed the CRA on March 4 with a bipartisan 'supermajority' of 70-27, followed by the House’s approval with a 292-132 vote on March 11.
Republican Senator from Texas, Ted Cruz, who introduced the CRA in the Senate, described the upper chamber’s passage of the bill earlier this month as “a victory for American innovation.”
If, as expected, the CRA passes the Senate again on Thursday, it could be sent to President Trump’s desk for signing on Friday, according to the aide.
Trump’s signature on the CRA would make it the first crypto-related bill to become law.
Crypto Firms Fight Back Against ‘Regulation by Criminal Indictment’
A coalition of more than 30 crypto companies sent a letter Wednesday morning to the leadership of the Senate Banking and Judiciary Committees, as well as the House Financial Services and Judiciary Committees, urging them to address what they view as an overreach by the Department of Justice in its interpretation of the law concerning 'unlicensed money transmitting businesses.’
The letter, led by the DeFi Education Fund—an advocacy group focused on decentralized finance—was also signed by major industry players, including exchanges Coinbase and Kraken, crypto venture capital firms A16z, Multicoin Capital, and Paradigm, as well as self-custody companies Exodus and Ledger.
Crypto In America has obtained a copy of the letter and is the first to report on it.
The missive criticizes the DOJ’s position that DeFi platforms can be classified as money transmitting businesses, potentially holding software developers criminally liable for indirectly enabling illicit financial activity. The signers seek clarity on the DOJ’s interpretation of Section 1960 of the U.S. criminal code (which criminalizes centralized entities operating an unlicensed money transmitting business), arguing it is too broad and could threaten developers who don’t handle customer funds. They also express concern that the DOJ's approach creates confusion as it contradicts 2019 guidance from FinCEN, which excludes developers from being considered money transmitters.
In August 2023, the DOJ brought criminal charges against Roman Storm, a co-creator of the crypto mixer Tornado Cash, for allegedly operating an unlicensed money transmitting business and facilitating money laundering. This marked the first time the DOJ applied criminal charges to DeFi developers. Industry leaders are concerned that the Storm case could set a dangerous precedent for “regulation by criminal indictment,” potentially exposing other software developers to similar criminal charges, even if they don't directly engage in illegal activities or handle customer funds.
“The DeFi Education Fund’s number one policy priority is obtaining Congressional clarity on Section 1960, and we are so incredibly grateful to the broad coalition of crypto industry participants that united to defend the rights of software developers and to push back on the DOJ’s misguided approach of regulation by criminal indictment,” said Amanda Tuminelli, Executive Director and Chief Legal Officer of DeFi Education Fund.
A spokesperson for the DOJ did not immediately respond to a request for comment.
Members of the DeFi Education Fund will meet with Congressional leaders on Capitol Hill Wednesday to raise awareness of the issue.
Managing Partner of Multicoin Capital Sits Down with Crypto In America
In this week’s episode of Crypto In America, the team sits down with Kyle Samani, Managing Partner at Multicoin Capital, to discuss his role in shaping crypto policy in D.C.
Samani, who attended the inaugural White House Crypto Summit earlier this month, shares his insights on stablecoin legislation, the crypto venture capital landscape, how he's advising U.S. founders and portfolio companies, upcoming regulatory headwinds, and more.
Tune in on Spotify, Apple, YouTube, and X.
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