Briefing
The US President signed a Congressional Review Act (CRA) joint resolution, H.J. Res. 25, officially disapproving and repealing the Treasury Department and IRS’s final rule on digital asset broker reporting (T.D. 10021). This definitive legislative action immediately eliminates the controversial mandate that would have forced non-custodial entities, such as DeFi front-ends and certain wallet providers, to implement a system for collecting sensitive taxpayer information and filing Form 1099-B information returns. The primary consequence is the removal of a significant, operationally unworkable compliance obligation that was originally scheduled to take effect for the 2027 tax year.
Context
Prior to this repeal, the digital asset industry operated under a looming, high-stakes compliance challenge stemming from the Infrastructure Investment and Jobs Act of 2021, which expanded the definition of a “broker” to include entities facilitating digital asset transfers. The Treasury’s subsequent final rule extended this requirement to non-custodial platforms, creating a profound legal ambiguity regarding the technical feasibility of collecting know-your-customer (KYC) data and tracking cost basis in decentralized environments. This lack of clarity had been cited as a major inhibitor to domestic decentralized finance innovation.
Analysis
This regulatory reversal fundamentally alters the compliance architecture for non-custodial financial services. It immediately halts the capital expenditure and system redesign efforts required to integrate traditional finance’s Form 1099-B reporting into decentralized protocols, which inherently lack the necessary intermediary data collection points. For regulated entities, the action reduces systemic risk exposure related to non-compliance with an unworkable standard.
The legislative branch has now exercised its oversight to prevent a regulatory framework from stifling innovation due to operational infeasibility, though it simultaneously re-opens the policy vacuum regarding comprehensive digital asset tax reporting. This is a critical update because it replaces an impossible mandate with a clear, albeit temporary, regulatory pause.
Parameters
- Overturned Rule ∞ T.D. 10021 (IRS/Treasury final rule on digital asset broker reporting).
- Effective Compliance Date Nullified ∞ January 1, 2027 (Start date for reporting).
- Legal Mechanism ∞ Congressional Review Act (CRA) Joint Resolution H.J. Res. 25.
- Reporting Form Eliminated ∞ Form 1099-B (Gross Proceeds and Basis Reporting).
Outlook
The repeal of the Treasury’s rule establishes a clear legislative precedent against applying traditional broker-dealer compliance standards to non-custodial DeFi infrastructure. The immediate next phase shifts the burden back to Congress to develop a new, technologically-neutral, and workable tax reporting framework that balances revenue generation with the preservation of decentralized innovation. The strategic focus for firms now moves from operationalizing an impossible rule to actively engaging with policymakers on the design of a future, viable digital asset tax regime, which is likely to involve a new legislative effort.
Verdict
The legislative repeal of the non-custodial broker reporting rule is a decisive, pro-innovation intervention that prevents an operationally infeasible tax standard from permanently crippling the US decentralized finance sector.
