On July 17, 2025, the U.S. Senate was reported to be gearing up for a vote to overturn an Internal Revenue Service (IRS) rule finalized in December 2024, which classifies certain DeFi participants as brokers, requiring them to collect and report user data.
Led by Senator Ted Cruz, this effort under the Congressional Review Act (CRA) aims to alleviate regulatory burdens on Decentralized Finance (DeFi) platforms, fostering innovation in the crypto ecosystem.
The IRS broker rule mandates that DeFi protocols, such as decentralized exchanges (DEXs) like Uniswap, comply with tax reporting requirements similar to traditional financial institutions.
This has raised concerns among DeFi developers, as the pseudonymous and permissionless nature of DeFi complicates compliance. The rule could deter innovation and push DeFi projects offshore, according to industry advocates.
The Senate vote reflects growing recognition of DeFi’s role in providing financial services without intermediaries.
DeFi platforms enable peer-to-peer transactions for lending, borrowing, and trading via smart contracts on blockchains like Ethereum. The IRS rule threatens to impose KYC/AML requirements, potentially undermining DeFi’s core principles of transparency and accessibility.
The CRA effort, supported by crypto-friendly lawmakers, aims to protect DeFi’s decentralized nature, which has attracted millions of users and over $150 billion in TVL globally.
Risks remain, as DeFi faces challenges like smart contract exploits and regulatory scrutiny over illicit finance, with a 2023 Treasury report noting vulnerabilities to money laundering.
The Senate’s potential reversal could encourage DeFi growth in the U.S., aligning with the recent Genius Act and Clarity Act passages. Investors are advised to monitor regulatory developments and ensure platform security before engaging in DeFi activities.
If successful, the Senate vote could bolster DeFi innovation, attracting institutional investment and reinforcing the United States as a hub for blockchain-based finance. This move underscores DeFi’s potential to reshape financial systems with greater accessibility and efficiency.
