Congress Nullifies IRS Crypto Broker Rule Blocking New DeFi Reporting Mandates → Regulation

A central, white toroidal shape intersects a cluster of blue, crystalline structures, surrounded by luminous white spheres encased in transparent, faceted shells. This abstract representation visualizes a sophisticated cryptographic nexus, likely symbolizing the core architecture of a decentralized ledger technology DLT or a distributed autonomous organization DAO

A detailed abstract render showcases glossy white spheres, acting as interconnected nodes, linked by silver metallic rods. The core of this structure is filled with an abundance of sparkling, multifaceted blue crystalline shapes, resembling digital assets

Briefing

The US Congress, via the Congressional Review Act (CRA), has nullified the Treasury Department and IRS rule that would have classified non-custodial entities, including many DeFi protocols and wallet providers, as “brokers” subject to extensive 1099-B tax reporting requirements. This legislative intervention immediately removes a significant and operationally infeasible compliance burden from the decentralized finance sector, establishing a strong statutory precedent that also prohibits the Treasury from issuing a substantially similar rule in the future without explicit new legislation, thus granting the industry a critical, permanent reprieve from the rule’s original January 1, 2026, implementation date.

A radiant full moon, appearing as a central digital asset, is encircled by fragmented metallic rings. Dynamic masses of deep blue and white cloud-like material flow around and within these structures

Context

Prior to this action, the digital asset industry operated under a looming, existential threat of an expanded broker definition that extended traditional finance reporting obligations to non-custodial entities. The Treasury/IRS rule, which was an interpretation of the Infrastructure Investment and Jobs Act (IIJA), created a compliance impossibility for many decentralized and non-intermediated platforms, as they lack the ability to collect the necessary Know-Your-Customer (KYC) and taxpayer identification data required for the 1099-B reporting regime. This ambiguity was a major impediment to US-based DeFi innovation, forcing strategic relocation considerations for many projects.

A complex, three-dimensional network structure is depicted, featuring a blurred blue tubular framework in the background and a sharp, transparent tubular network with metallic coiled connectors in the foreground. The coiled connectors act as nodes, linking the transparent tubes together

Analysis

This nullification fundamentally alters the compliance architecture for non-custodial digital asset businesses by eliminating the need to build a complex, user-facing tax information collection and reporting module. For DeFi protocols, miners, and software developers, the immediate strategic implication is the removal of the legal risk associated with non-compliance with the rule’s impossible data collection requirements. This action clarifies that the US regulatory perimeter for tax reporting will focus on custodial intermediaries, thereby unlocking capital and operational resources previously reserved for mitigating this specific regulatory risk. The legislative veto is a decisive signal that Congress intends to lead on tax policy for decentralized systems.

A close-up view reveals complex, intertwined metallic structures, predominantly in vibrant blue and silver tones. These highly detailed components feature intricate panels, visible bolts, and subtle wiring, creating a sense of advanced engineering and precision

Parameters

Key Metric → CRA Resolution → The specific legislative mechanism used to nullify the rule.
Affected Entities → Non-custodial entities → The primary group (DeFi protocols, miners, wallet providers) that is now exempt from the rule.
Nullified Rule → Expanded Broker Rule → The specific IRS/Treasury rule that was repealed.
Implementation Date Blocked → January 1, 2026 → The original date the rule was set to take effect.

A snow-covered mass, resembling an iceberg, floats in serene blue water, hosting a textured white sphere and interacting with a metallic, faceted object. From this interaction, a vivid blue liquid cascades into the water, creating white splashes

Outlook

The successful use of the Congressional Review Act sets a powerful precedent for the digital asset industry’s ability to leverage legislative tools to overturn executive agency rulemaking deemed technically infeasible or harmful to innovation. The focus now shifts back to Congress to develop a new, technology-neutral legislative solution for digital asset tax reporting that respects the non-custodial nature of decentralized finance. This clarity is likely to accelerate domestic development and investment in US-based DeFi projects, as the existential threat of a compliance impossibility has been definitively removed.

A sleek, transparent blue electronic device, rectangular, rests on a plain white background. Its translucent casing reveals intricate metallic internal components, including a central circular mechanism with a pink jewel-like accent, and various blue structural elements

Verdict

This legislative nullification represents a critical, decisive victory for the decentralized finance sector, permanently resetting the US tax reporting framework to exclude non-custodial entities and affirming Congress’s ultimate authority over digital asset tax policy.

Tax reporting compliance, Congressional Review Act, DeFi regulation, Broker rule nullification, Digital asset taxation, Non-custodial entities, Information reporting, Treasury Department, Legislative action, US policy shift, Decentralized finance, Taxpayer identification, Compliance burden, Regulatory certainty, IRS guidance, Broker definition, Digital assets, Financial services, US Congress, CRA resolution Signal Acquired from → gibsondunn.com