White House Crypto & AI Advisor David Sacks Supports IRS Broker Rule Repeal

US lawmakers are moving to overturn the Internal Revenue Service’s (IRS) new broker rule, which requires decentralized finance (DeFi) platforms to collect and report user data.

The effort, led by Republican Senator Ted Cruz, is being pursued under the Congressional Review Act (CRA), a legislative tool that allows Congress to strike down recent federal regulations.

IRS Crypto Reporting Rule Faces Congressional Challenge

Fox Business reporter Eleanor Terrett revealed on March 4 that Cruz is spearheading the CRA resolution, which was initially scheduled for a vote on March 5.

However, scheduling conflicts, including the upcoming State of the Union address, may postpone the vote.

If passed with a simple majority in both the House and Senate, the CRA would overturn the IRS rule and expand the definition of a “broker” to include DeFi developers and front-end operators.

Notably, critics argue that the rule is incompatible with the nature of decentralized finance and imposes excessive compliance burdens on the industry.

The broker rule, finalized last year, already expands the definition of a “broker” to include DeFi developers, front-ends, and other entities facilitating digital asset transactions.

It mandates tax reporting requirements, Know Your Customer (KYC) measures, and compliance obligations for platforms handling digital assets, including non-fungible tokens (NFTs) and stablecoins.

However, Senator Cruz criticized the regulation as an attempt by the Biden administration to stifle cryptocurrency development in the US.

“In a midnight move, the Biden administration issued their decentralized finance rule, which directly and immediately would harm American cryptocurrency innovation and drive development overseas,” Cruz said.

Cruz added, “This week Congress will vote on my resolution to rescind that regulation. I’m confident we will.”

Crypto advocates argue that the IRS rule is ill-suited for the DeFi space, as it treats software developers and infrastructure providers as brokers.

Notably, the White House, through Crypto Tzar David Sacks, has supported the move to revoke the rule.

On Tuesday, Sacks called the IRS regulation a “so-called Broker DeFi Rule, an 11th-hour attack on the crypto community by the Biden administration.”

With lawmakers pushing to reverse federal agency decisions, the outcome of this vote could set the tone for future digital asset regulation in the US.

U.S. Lawmakers Push to Overturn CFPB Rule as Crypto Regulation Fight Intensifies

Alongside the IRS broker rule challenge, lawmakers are also targeting a Consumer Financial Protection Bureau (CFPB) regulation on digital payment apps.

Senator Pete Ricketts has introduced a resolution to overturn the rule, which critics argue the rule unfairly restricts fintech companies offering digital wallets and payment services.

“The Biden administration did everything it could to stifle financial innovation, threatening to send digital asset companies overseas,” said Senate Majority Leader John Thune.

“The Senate is working to undo these burdensome regulations one at a time to restore financial freedom for the American people,” he added.

A matching resolution has already advanced in the House. If both chambers approve it, the president will make the final decision.

Meanwhile, crypto advocacy groups, led by The Blockchain Association, continue opposing the IRS rule. They argue that classifying DeFi infrastructure as financial intermediaries misinterprets the technology and exceeds regulatory authority.

Supporters, however, maintain that the rule is essential for tax compliance. The final decision could shape the future of DeFi regulation in the U.S.

As it stands now, especially with the White House crypto summit coming on March 7, the outcome of these events might set the stage for further policy discussions or provide much-needed clarity.

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