The battle over “Defi Broker Rules” is approaching its conclusion, raising questions about the next steps for crypto institutions.

On March 11, local time in the United States, the House of Representatives passed a resolution by a vote of 292 to 132 to overturn the IRS’s broker rule for DeFi entities. This rule required decentralized finance (DeFi) platforms to collect user tax and transaction information. Previously, on March 4, the Senate had already seen 70 senators vote in favor of repealing the rule. However, due to budgetary regulations, the Senate will need to vote again. If it passes once more and is signed by President Donald Trump, the rule will be permanently prohibited from being reintroduced.

Repeal of the “DeFi broker rule”: a long-standing confrontation between regulation and decentralization

Since 2014, when the IRS issued Notice 2014-21 officially classifying cryptocurrency as property rather than currency and establishing the corresponding tax framework, the conflict between decentralization and regulatory scrutiny has never ceased. In 2021, the signing of the Infrastructure Investment and Jobs Act (IIJA) mandated the reporting of all crypto asset transactions and introduced the use of Form 8300. This expanded crypto transaction reporting into the scope of Form 1099, significantly tightening tax regulations on crypto asset trading.

Form 1099 requires brokers to disclose detailed transaction data, including the transaction date, type (such as purchase, sale, or exchange), and exact transaction amounts. It covers total gains, potential profits or losses, and cost basis information. Critically, brokers must provide comprehensive investor information, including name, address, Social Security number, and specifics about the type and quantity of digital assets, along with their fair market value.

TaXDAO：“US Crypto Broker Rules: Bitter Medicine or Deadly Poison?” 》

Starting from January 1, 2025, the IRS officially implemented the law on broker reporting of digital asset sales and transactions, known as the “DeFi broker rule.” Its core provisions include anti-money laundering (AML), know-your-customer (KYC) requirements, smart contract audits, fund security, and transparency standards. This legislation signifies that the United States has entered an unprecedentedly strict phase of tax regulation for crypto assets.

Although, according to TaXDAO’s interpretation, this rule has certain positive effects in combating money laundering, terrorism financing, and tax evasion, it has already faced widespread criticism from the crypto industry. The digital asset think tank Coin Center was one of the first to voice opposition, stating that the proposal is “technically infeasible.” Decentralized platforms are fundamentally different from traditional financial institutions, as they do not hold funds or store customer data in the same manner. Industry analysts believe that the “DeFi broker rule” follows a traditional finance (TradFi) management model and overlooks the core innovations of decentralization and anonymity in DeFi. This places significant compliance burdens on crypto institutions and greatly increases operational costs.

On February 20, 2025, the Blockchain Association, together with 75 participants from the crypto industry — including well-known companies such as Coinbase, Kraken, and Uniswap Labs — signed an open letter calling on the U.S. Congress to repeal the IRS’s DeFi broker rule. The letter pointed out that the “DeFi broker rule,” finalized at the end of the Biden administration, represents “regulatory overreach,” fundamentally misunderstands the technology it seeks to regulate, and disregards the intentions of Congress.

a16z Crypto’s Head of Regulatory Affairs, Michele Korver, also stated in a post on X that the new broker reporting rules issued by the U.S. Treasury pose a direct threat to the development vision of DeFi and could hinder the future of DeFi innovation in the United States.

It is undeniable that since Trump took office, despite the market’s generally pessimistic reaction to his anticipated policies, substantial progress has been made in crypto regulation. On March 4, 2025, local time in the United States, “Crypto Czar” and current White House Director of AI and Cryptocurrency, David Sacks, stated in a post on X, “The White House is pleased to announce its support for the Congressional Review Act (CRA) introduced by Senator Ted Cruz and Congressman Mike Carey to repeal the so-called ‘DeFi broker rule’ — a last-minute attack on the crypto community by the Biden administration.”

Post-Bill Era: Three Potential Regulatory Variables Emerge

While the House’s decision to overturn the DeFi broker rule has lifted certain restraints, the regulatory battle for the crypto industry is far from over. Based on current legislative dynamics and policy frameworks, three potential regulatory focuses may dominate the next phase:

1.Accelerated Stablecoin Legislation

The Trump administration has explicitly defined stablecoins as “payment infrastructure.” Both the Senate’s GENIUS Act and the House’s Stablecoin Act are advancing in parallel, aiming to establish a unified federal licensing framework. Issuers would be required to maintain 100% reserves and undergo bank-level audits. This will dramatically raise the threshold for issuing USD-backed stablecoins such as USDC and BUSD, and algorithmic stablecoins may be classified as securities. According to analysis from the Blockchain Association, if passed, the U.S. could become the first major economy with systemic stablecoin regulations — but it may also force smaller issuers to exit the market.

2.Escalating Jurisdictional Battle Between SEC and CFTC

Although the DeFi Broker Rule was repealed, the SEC continues to use the “Howey Test” to classify tokens as securities. The recent closure of the Uniswap Labs investigation sends a subtle message — when a protocol achieves a high level of decentralization (without centralized team control), the SEC tends to classify it as a “commodity.” Otherwise, it may be considered an “unregistered security.” This logic — “the level of technical decentralization determines regulatory classification” — is pushing projects to accelerate permissionless design transformations. At the same time, the CFTC is leveraging the Digital Commodity Consumer Protection Act to fight for oversight of spot trading platforms. Coinbase and other exchanges have already applied for dual licenses, resulting in a 37% year-over-year increase in compliance costs.

3.Shift Toward Tech-Based On-Chain Taxation and AML Enforcement

Although the IRS has lost its mandate for forced DeFi reporting, it has partnered with FinCEN to enhance the use of on-chain analytics tools. Data from Q1 2025 shows that the IRS tracked $1.2 billion in crypto-related criminal funds via platforms like Arkham and Elliptic — a 210% increase from the same period last year. Notably, while the Trump administration’s executive order prohibits the development of a CBDC, it has directed the Treasury to study technology solutions for “Bitcoin reserves and tax transparency.” In the future, this could lead to pilot programs for automatic capital gains tax deductions via smart contracts. This trend of “regulatory technology replacing forced rules” is pushing exchanges and wallet providers to upgrade their KYT (Know Your Trade) systems.

As the DeFi Broker Rule battle draws to a close, crypto institutions are shifting compliance resources toward stablecoin filings, token attribute audits, and on-chain risk management systems. For instance, Coinbase’s Chief Compliance Officer has revealed the company has formed a 300-person team dedicated to stablecoin licensing applications and is collaborating with AWS to develop a “decentralization certification” tool.

Meanwhile, following the closure of its SEC investigation, Uniswap Labs announced it would lower the community proposal threshold for its UNI governance token from 10,000 UNI to 5,000 UNI in order to accelerate decentralization.

All these actions confirm the industry consensus: U.S. regulation is moving away from a “one-size-fits-all” model and toward “tech-feature-based regulation.” The ability to strike a balance between innovation and compliance through technical solutions will become the key competitive factor in the next phase — and potentially the catalyst for the market’s next major growth cycle once the current bubble deflates.

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