The US Senate has voted to repeal an IRS rule that has implications for the decentralized finance (DeFi) ecosystem. According to experts, the decision could set a key precedent for cryptocurrency regulation and financial privacy in the country.
An Internal Revenue Service (IRS) rule that sought to expand the definition of “broker” to include key participants in the DeFi ecosystem has been repealed. The rule, which had sparked intense pushback from the crypto industry and lawmakers from both parties, sought to force platforms and developers in the decentralized finance space built on blockchain to report transactions and user information to the IRS.
Although the agency's stated goal was to increase tax transparency, critics had argued that the move was too broad, impractical and potentially stifling innovation in a rapidly growing sector.
PREPARE YOUR WALLETWith a recent vote showing strong bipartisan support for repealing this rule, the regulatory landscape for cryptocurrencies in the United States is on the cusp of a significant shift.
The controversial IRS rule: What's at stake for DeFi?
La standard The IRS-proposed definition in question sought to expand the definition of “broker” to include platforms and developers operating in the DeFi ecosystem. Traditionally, a broker is defined as an entity that facilitates transactions on behalf of its clients, such as securities dealers. However, the IRS’s new definition extended this classification to actors that do not have a direct relationship with users, such as infrastructure providers, software developers, and node validators on public blockchain networks.
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This expansion had raised concerns in the crypto sector because, under the new rule, even those who simply provide the underlying technology for DeFi transactions to work They could have been considered brokers and therefore required to collect and report tax information from users.Not only would this be an administrative and technical burden for many projects, but it would also pose ethical and legal challenges, especially around financial privacy and the decentralized nature of DeFi platforms.
SOLANA BUYSReactions from industry and privacy advocates
The reaction of the DeFi industry and financial privacy advocates was not long in coming in the face of this potential threat. Experts and organizations such as the Blockchain Association and Coin Center argued that the IRS rule was unconstitutional and technically unfeasibleThey noted that DeFi software and platform developers do not have access to the information needed to comply with reporting requirements as they operate in decentralized environments where they do not control or have knowledge of individual users' transactions.
In fact, the Blockchain Association had filed a lawsuit against the implementation of this rule, emphasizing that it could discourage companies from operating in the United States and lead them to relocate to more favorable jurisdictions. This would be a blow to American innovation and a boost to global competition, the association said. In addition, financial privacy was also at the center of the debate, since the obligation to report user information could violate fundamental rights.
BUY ETHEREUM70 votes in favor of repealing the IRS rule
Senate vote to repeal IRS rule closed with 70 votes in favor and 27 against, highlighting the bipartisan support that cryptocurrencies are gaining and the change in the political perception of these assets in the United States. For experts, the revocation of this rule indicates that both parties recognize the potential of blockchain and DeFi technologies to transform the financial system.
In short, the Senate’s decision to repeal the IRS rule marks an important milestone in the history of cryptocurrency regulation in the United States. If the resolution is passed by the House of Representatives and signed by the president, it will set a key precedent for the DeFi space and reinforce the country’s position as a leader in financial innovation.
INVITE AND WINHowever, the debate over how to regulate cryptocurrencies without stifling their potential remains a challenge. For now, the industry is celebrating what it sees as a step in the right direction to protect financial privacy and foster innovation in the DeFi ecosystem.
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