US Senate Votes to Overturn Crypto Tax Rule, Next to the House

On March 3, the U.S. Senate voted 70-28 in favor of a joint resolution to overturn a controversial tax rule that mandates “custodial brokers” to report user information to the Internal Revenue Service (IRS). The rule, seen as a threat to privacy and decentralized finance (DeFi), had drawn criticism from across the crypto industry. Senators, led by Sen. Ted Cruz, R-Texas, argued that it would undermine innovation, stifle DeFi growth, and raise privacy concerns for Americans. 

The bill enjoys the backing of the Trump administration. Similar legislation working its way through the House would need to pass before going to Trump’s desk for his signature.

The resolution, introduced by Senator Cruz earlier this year, has garnered significant bipartisan support, with most Republicans voting in favor, along with some Democrats like Senate Minority Leader Chuck Schumer and Sen. John Fetterman. Cruz emphasized that the rule, which would require DeFi platforms to behave like traditional securities brokers, could cripple cryptocurrency development in the U.S. and cause unnecessary compliance burdens on American DeFi companies.

The tax rule, which was issued in the final days of the previous administration, requires custodial crypto brokers to collect and report extensive user data, such as names and addresses, to the IRS. The crypto industry has argued that this would infringe on user privacy and could drive crypto innovation overseas. Some DeFi platforms, like Uniswap, may face difficulties complying with this rule, given that many do not have centralized service providers interfacing directly with customers, a key requirement of the tax rule.

While the Senate’s vote signals a major victory for the crypto industry, the rule’s repeal still needs approval in the U.S. House of Representatives. Last week, the House Ways and Means Committee voted to advance a companion resolution, but the full House must vote before it can be sent to Trump’s desk for signature. The crypto community has strongly opposed the tax rule, with some groups, such as the Blockchain Association, filing lawsuits against the IRS, warning that such regulations could push the rapidly growing technology offshore.